Flat To Softer For Core FI In Asia

Macro news flow has been mixed since the Tokyo re-open, with some positive vaccine news (albeit some of which was more a case of trials running on schedule) countered by reports of impending partial district lockdowns in Hong Kong. U.S. Tsys held to narrow ranges in Asia-Pac hours, with focus on the large nearby TYG1 option OI at the 137.00 strike ahead of today's February option expiry, with delta hedging plays having the ability to limit price swings on Friday. Elsewhere in the options space, 10-Year Tsy options saw fresh downside interest via the TYJ1 138.00/133.00 risk reversal, buying the puts to sell the calls, targeting a ~32bp uptick in yields over the life of the contract. Remember that we saw a 10.0K block of the TYJ1 138.00/133.50 risk reversal during Asia hours earlier this week, although today's flow saw 4.0K of the FVH1 futures lifted at the same time. T-Notes last -0-00+ at 136-28, holding to a 0-03+ range, with cash Tsy yields little changed. We also saw a 20K screen buyer of EDU1/Z1, with Eurodollar futures running within 0.5 tick of settlement levels through the reds.

• Mixed performance was seen across the JGB curve, with 7s underperforming surrounding paper as futures sold off, with the latter last 13 ticks softer than settlement levels. Little in the way of major news flow has crossed during the Tokyo hours, with most of the local focus falling on speculation surrounding the potential cancellation of this year's Tokyo Olympics. Re: that matter, PM Suga has stressed that he wants the event to go ahead, with various officials also stating that the games will be held. Elsewhere, the major national CPI metrics moved further into deflationary territory in December.
• Aussie bonds traded on the defensive, even with a strong ACGB tender and DV01 light weekly issuance slate from the AOFM becoming apparent. There appeared to be some spill over from across the ditch with the NZGB space seeing some cheapening on the back of firmer than expected NZ CPI data and heavy offer/cover ratios in the latest round of RBNZ NZGB purchases. YM -1.0, XM -5.5.