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Regional Holidays Sap Liquidity In Asia

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T-Notes consolidated a little above Monday's late lows in Asia trade, sticking within the confines of a 0-03+ range to last trade -0-01+ at 134-05. Cash Tsys run little changed to ~1.0bp richer across the curve at typing. Macro headline flow was on the light side, with the major Chinese equity indices trading either side of unchanged after Monday's regulatory-linked slide. Note that a Chinese state-run media outlet published a piece (citing analysts) flagging the "short-term" impact of Monday's headwinds for equities, pointing to expectations for the long-term uptrend to continue. Asia-Pac flow was headlined by a 1.5K lot block buy of UXYH1 (~$199K DV01 equivalent). The NY docket will be headlined by durable goods and consumer confidence data, as well as 5-Year Tsy supply.

  • JGB futures moved to Tokyo session lows during the afternoon session, having a look through their overnight trough, last -15. The major cash JGB benchmarks run little changed to ~1.5bp cheaper on the day, led by 7s, suggesting the move there may be futures led. The latest 40-Year JGB auction was lukewarm. It saw the high yield print a touch below broader expectations (0.735% vs. the BBG dealer consensus which looked for 0.740%), while the cover ratio nudged lower to 2.716x (6-auction average 2.816x). BoJ Governor Kuroda will speak later in the Tokyo afternoon.
  • In Australia, YM +0.5, XM -1.5 after the latter had a look at its overnight low in early Sydney dealing before recovering a little. NSW saw another uptick in new COVID cases today (172). On a more positive note, Victoria has wound back the harshest of its COVID restrictions. The state also declared that it is set to enforce a hard border with the state of NSW. Meanwhile, South Australia confirmed that it is moving out of its own lockdown, although the state Premier stressed that significant restrictions will remain. Q2 CPI data dominates the domestic docket on Wednesday, although the focus on the local COVID situation and perceived transitory nature of the uptick in the inflation readings cloud the potential for lasting market impact in the wake of the release.