Core FI Under Modest Pressure Overnight

An e-mini bid linked to fiscal hope re: U.S. President Biden’s BBG plan (per source reports, pointing to Biden & Senator Manchin conducting discussions on the matter in early ‘22) applied some modest pressure to Tsys overnight, with TYH2 last -0-03 at 131-02, just off the base of the contract’s 0-06 overnight range. Cash Tsys run flat to 0.5bp cheaper across the curve. 20-Year U.S. Tsy supply will provide the focal point of the U.S. docket on Tuesday. Participants also await President Biden’s Tuesday address. White House press secretary Psaki has noted that the speech is 'not about locking the country down,' but it will focus on the vaccination drive.

• A relatively lacklustre morning saw JGB futures edge away from their overnight low, before the broader impetus (which included a ~2% rally in the Nikkei 225) and the Japanese cabinet office’s first upgrade to its main economic assessment since July ’20 applied some pressure during the Tokyo afternoon. Re: the latter, this came after press reports pointed to the potential for a government upgrade re: its FY22 real GDP growth view to 3.0%+ (currently 2.2%), owing to the impact of the well-documented fiscal support package that has been outlined and in recent weeks (formally enacted on Monday). Futures finished -16. Cash JGB trade saw the major benchmarks print little changed to ~1bp cheaper on the day (the 7- to 20-Year zone led the weakness). The latest round of BoJ Rinban operations (covering 1- to 10-Year JGBs) drew offer/cover ratios of 2.7-3.0x times. This didn’t provide any notable impetus for the space
• Aussie bond futures drifted lower in the wake of the release of December’s RBA meeting minutes, with CBA now expecting for the RBA to end its bond purchase scheme in February, as they look for firmer than expected Q4 CPI and labour market data (at least when compared to RBA projections) ahead of the Bank’s February meeting. The uptick in e-minis has also helped apply some pressure to ACGBs. YM -1.0 & XM -6.0 at the bell.