Core FI Hold Tight Ranges With Japan On Holidays

T-Notes were happy to hug a tight 0-02+ range in Asia-Pac hours, with broader liquidity sapped by a market holiday in Japan. The contract sits +0-01+ at 139-14, having edged higher as e-minis returned into negative territory. News flow from over the weekend offered little impetus, despite tensions in both global geopolitics and domestic U.S. politics. Reports pointing to increased Chinese military activity in the Taiwan Strait and the PLA's military drill seemingly involving a simulated bomber strike on a U.S. base on Guam provoked little to no market reaction, as did U.S. spat with its allies over Washington's decision to reimpose sanctions on Iran. U.S. news flow centred around a political stand-off surrounding the nomination of the successor of the late Supreme Court Judge Ginsburg, with Democrats and (so far) two Republican Senators speaking out against finalising the process before the presidential election. The closely watched Oracle/TikTok saga led to a deal that receiver U.S. Pres Trump's "blessing", while China left its LPRs unchanged, as expected, but the FI space was unfazed. Cash Tsys were closed owing to a holiday in Tokyo, but Eurodollar futures trade unch. to -0.5 tick as we type.

• Aussie bond futures respected familiar ranges too; YM is unch. & XM +3.0 after creeping higher through the session despite the improvement in Victoria's coronavirus situation, evidenced by a decline in local daily case count to the lowest level in more than three months. Cash ACGB curve has also underwent some bull flattening, with yields last seen 0.5-4.0bp lower. Bills trade -1 to +1 tick through the reds. Local press circulated fiscal chatter ahead of next month's release of the Australian budget. The Sydney Morning Herald reported that the government is preparing for a massive spending spree, which will push deficit well beyond A$200bn, while the AFR noted that states will receive extra infrastructure funding with a "use-it-or-lose-it" condition attached. The reports drew attention after PM Morrison refused to comment on the details of planned support measures, while also striking an optimistic note re: recovery of Australia's labour market.