JGBs See Light Bid, U.S. Tsys & ACGBs Limited

Some screen selling of T-Notes helped the contract to fresh session lows on the back of the stronger than expected Caixin services PMI print, although the contract stuck to the confines of a narrow 0-03+ range in Asia-Pac hours. A bounce in the Hang Seng, reportedly on the back of Chinese state media toning down its rhetoric against the online gaming industry, also applied some modest pressure to the space at the same time that the Chinese data hit. T-Notes last trade -0-01+ at 134-30+ on volume paltry volume of ~52K. Cash Tsys trade little changed to 1.0bp cheaper across the curve, with very modest bear steepening in play. Focus on Wednesday moves to an address from Fed Vice Chair Clarida, ADP employment data and the quarterly refunding announcement from the U.S. Tsy. We will also hear from St. Louis Fed President Bullard ('22 voter)

• JGB futures last print +7, with cash JGBs little changed to 1.0bp richer as 10s have a look below the 0.01% yield level and flirt with 0% (although most do not expect a sustained break into negative territory under the current dynamics). The domestic COVID situation continues to dominate headline flow, with Japan's top medical advisor noting that the authorities are considering placing the entire country under a state of emergency. The latest round of BoJ Rinban operations (covering 1- to 5- and 10- to 25-Year JGBs) revealed slightly lower to steady cover ratios. Both of these matters may have helped the bid in the Tokyo afternoon.
• The ACGB curve has seen some modest twist flattening, with YM -1.0 and XM +0.5 at typing. The front-end may have seen some very modest trans-Tasman pressure on the hawkish RBNZ repricing which came in the wake of the latest NZ labour market report. We also saw comments from S&P, with the ratings agency noting that the COVID-related lockdowns that have been implemented in Australia are unlikely to slow the country's fiscal repair. S&P also suggest that it does not see the lockdowns weighing heavily on Australia's AAA rating.