Early Weakness Unwound

The ability of Japanese PM Kishida to hold onto his legislative majority in the weekend's lower house elections removed some political uncertainty and increased the likelihood of notable fiscal support in the coming months, applying pressure to core fixed income markets in Asia, before a recovery later in the overnight session. This outweighed softer than expected official PMI data out of China (which pointed to manufacturers hampered by electricity limitations and surging input prices).

• TYZ1 is a touch lower as a result, -0-03 at 130-19+, 0-05 clear of lows. Bear flattening has been at the fore with yields running little changed to 2.5bp higher across the curve, as the belly leads the weakness. The latest ISM m'fing survey headlines the U.S. docket on Monday, although more focus is on Wednesday's FOMC decision (where a taper announcement is expected) and Friday's NFP print.
• JGB futures ran lower on the aforementioned local political developments, before recovering to last print +10, with yields little changed to ~1bp lower across most of the curve. Domestic equities outperform. PM Kishida failed to offer much new in his post-election address. The outright cheapening and carry and rolldown on offer allowed the cover ratio to tick higher at today's 10-Year JGB auction, after last month's soft offering saw the metric register a multi-year low. Still, the tail saw a slight widening in length vs. the prev. auction, with the low price missing broader dealer exp. (which stood at 99.90, per the BBG dealer poll), as some worry re: the global monetary policy/inflation dynamic & domestic fiscal situation remain evident.
• Aussie bond futures recovered from the early Sydney weakness, YM leading the bid after last week's aggressive bear flattening, with some pre-RBA position squaring/adjustment evident after the dramatic moves witnessed last week and as local participants adjusted to Friday's after-hours recovery from session lows. YM +21.5, XM +18.5 at the close.