Core FI Grind Lower As Risk Appetite Improves

Core FI took their cue from stock markets, as Asia-Pacific equity benchmarks and U.S. equity index futures advanced, signifying a broader improvement in risk appetite. This generated selling pressure, which weighed on FI overnight. Some pointed to a positive reception of a decline in Covid-19 hospitalization rates in some U.S. states, but global case count rose past 20mn, while other familiar concerns continued to linger. A briefing from U.S. President Trump, interrupted by a shootout next to the White House, provoked a muted market response, with the POTUS noting that he considers slashing capital gain tax and middle income tax. Worth noting that Japanese and Singaporean players returned after domestic market closures. T-Notes probed the water under Monday's lows and last sit -0-01+ at 139-26+. Cash Tsy yields edged higher across the curve, but held tight ranges. Eurodollar futures last trade -0.5 to +0.5 through the reds. Domestic PPI data and Fedspeak from Daly & Barkin headline in the U.S. today.

• JGB re-opened after a long weekend and headed lower from the off, falling to the lowest levels since mid-July, as the space absorbed news/data flow from the period since Friday's end of play, including above-foracast U.S. NFP figures. The contract last trades -27 ticks at 152.02. Cash JGB yields sit higher across a generally steeper curve, with 7s underperforming. Japan reported a wider than expected BoP current account surplus and focus now moves to local Eco Watchers Survey.
• ACGBs were subject to the same risk-on impetus. YM -1.0 & XM -1.5, both testing session lows, as we head towards the London session. Curve has steepened a tad in cash trade, with yields ticking higher. Bills last seen -2 to +1 tick through the reds. The space eased off despite continued concerns over the impact of coronavirus resurgence on local economy, with the latest NAB Business Confidence revealing a drop in headline index (albeit coupled with recovery in Conditions). The AOFM auctioned A$150mn worth of linkers.