Cross Currents Result In Mixed Markets

T-Notes have stuck to a 0-04 range, last +0-01 at 137-09, yields little changed across the cash curve. It would seem that some worry surrounding the Novavax COVID vaccine's efficacy re: the South African strain of the virus (which became evident in very late NY trade) limited the steepening impetus that was initially seen after the re-open. A 3.0K screen buyer of TYH1 also helped to support the space. Still, flow was dominated by yet another 10K risk reversal block trade during Asia-Pac hours, this time in the TYJ1 137.00/135.00 strategy, buying the puts to sell the calls (60K worth of TYJ1 risk reversal strategies have crossed over the last week and a half).

• JGB futures sit 11 ticks below settlement levels, which comes on the back of the light pressure seen in core FI during NY hours, while some continue to speculate re: the potential for adjustments to the BoJ's JGB purchase plan for the month of February (which will be released after hours today). Paying flows in swaps also seemed to aid the momentum, with longer dated swap spread widening seen during the morning. There was also some focus on the summary of opinions from the BoJ's January meeting, in which one member of the BoJ board stressed that more flexible management of the Bank's YCC scheme is vital, while one board member also said the same about the Bank's ETF purchases. These are of course assumed to be the central areas in the BoJ's ongoing monetary policy review, with the results set to be released in March. A reminder that local press reports recently suggested that the BoJ will tolerate a wider trading band around the 0% centre point re: 10-Year JGB yields. Elsewhere, the latest round of BoJ Rinban operations saw purchases sizes that were in line with the previous rounds for each respective bucket, while the offer/cover ratios didn't provide any real points of interest.
• Little to pen for the Aussie bond space outside of the aforementioned hedging flow surrounding QTC's A$3.0bn Aug '32 issuance, with a subsequent unwind after the AOFM failed to announce the syndication of a new ACGB Nov '32 within next week's issuance schedule. That leaves the space steeper than settlement, drifting after the two aforementioned swings, with YM -0.5 and XM -5.0, with the latter 1.0 off of worst levels.