Core FI Mixed Amid Thinner Markets

The Tsy complex has unwound most of its early Asia bid (and more in some instances), in what was a holiday thinned Asia-Pac session, with thinner liquidity also set to be evident during Monday's European session. Participants pointed to various sources of geopolitical tension, an FT source report suggesting that the PBoC is leaning on lenders to restrain credit growth and continued GOP pushback vs. the size of U.S. President Biden's fiscal scheme as potential sources of support in early trade. Still, the moves were relatively shallow, with T-Notes last +0-01 at 130-31+, with the cash curve twist steepening (30s now print ~2bp cheaper on the day) as resolute equity markets and follow through from Friday's NFP print added some pressure to the longer end after the early richening.

• JGB futures have unwound their overnight losses, last printing +5 on the day, with cash JGBs experiencing very marginal richening (participants likely had one eye on tomorrow's 30-Year supply, which would have limited the firming). BoJ Rinban operations, which covered 1- to 5-Year JGBs, saw marginal upticks in the offer to cover ratios, even with the purchase offers increasing in size, as the Bank started to enact its tweaked purchase schedule. Elsewhere, a Chinese aircraft carrier has been spotted in waters near Okinawa, although this had little in the way of tangible impact on the space.