Core FI Generally Bid In Asia

A defensive start to the week for Chinese & Hong Kong equity indices weighed on broader risk appetite, with fears of increased regulatory burden/scrutiny from the Chinese authorities evident in the wake of the crackdown on the education sector, while deeper scrutiny surrounding broader internet based activities also became apparent. This has allowed the U.S. Tsy space to firm, with T-Notes +0-05 at 134-09+, while cash Tsys print 0.5-1.5bp richer across the curve, as 10s outperform. The opening salvos at the latest meeting between senior U.S. & Chinese officials weren't particularly warm (as was foretold). New home sales & Dallas Fed m'fing activity data headline the local docket during NY hours on Monday, although participants are clearly focused on the upcoming FOMC decision (Wednesday) and advance Q2 GDP reading (Thursday). 2-Year Tsy supply is also due on Monday.

• The latest bid in the U.S. Tsy space aided some very modest richening in areas of the cash JGB curve, with super-long paper perhaps limited by the proximity to tomorrow's 40-Year JGB supply. That leaves the major benchmarks across the cash JGB curve little changed to 0.5bp firmer on the day after the elongated Tokyo weekend. Futures last -2 after unwinding some of the losses witnessed in the final overnight session of last week during morning trade.
• Local COVID matters dominated in Australia, with suggestions in the press that NSW is conducting financial modelling for a lockdown in the Greater Sydney area through at least mid-September. There are also some suggestions that the NSW Treasurer will again request a restart of the JobKeeper scheme. The weekend also saw thousands protest the lockdowns across some of the country's major cities. On a more positive note, South Australia is set to exit its lockdown on Wednesday, although some restrictions will remain in place. Finally, Australia has signed an agreement for the purchase of 60mn additional Pfizer-BioNTech COVID vaccination doses, to be delivered in '22, and a further 25mn doses in '23, which would allow the country to conduct a vaccination "booster" scheme if needed. The A$800mn ACGB Nov '31 auction was well received, with the cover ratio jumping (even when we adjust for the downtick in notional amount on offer vs. the prev. auction of the line), while the weighted average yield printed 0.51bp through prevailing mids at the time of supply (per Yieldbroker). The structurally supportive matters we flagged ahead of the auction outweighed any valuation issues. The curve twist flattened a little as a result, with YM -0.5 and XM +1.0.