Latest Leg Of Cheapening Seemingly Results In Some Regional Demand In Asia

Friday’s post-NFP cheapening in global core FI markets seemed to draw money from the sidelines, resulting in a bid during early Tsy future and JGB dealing.

• Cash Tsys run little changed to 2bp richer across the curve as a result, bull flattening, with TYH2 last +0-06 at 126-30+, 0-01 off the peak of the contract’s 0-09 Asia range. The contract did register an incremental fresh multi-year low at the re-open, before the aforementioned demand supported the space. TYH2 operates on solid volume of over 130K. Note that flow was headlined by 20K of block sales in FVH2 118.75 put options vs. 14K of block lifts in FVJ2 117.50 puts, in what looked to be some profit taking coupled with rolling down & out. Looking ahead, the NY docket is virtually empty.
• JGB futures benefited from the broader core FI bid and expectations that the BoJ will act to defend the 0.25% upper boundary of its permitted 10-Year JGB yield trading range (perhaps pre-emptively), if required. This left JGB futures -2 at the bell, with most of the overnight session losses unwound. The super-long end led the richening, which pointed to Japanese lifer-driven demand given their already expressed preference for that zone of the curve. Major benchmarks across the curve were little changed to ~3bp richer on the day, as the bull flattening.
• Outside of the wider spread gyrations in core global FI markets, Aussie bonds looked to have a modest, delayed downtick on the back of the formalisation of the Australian international border re-opening (which will kick in on 21 February, for the double vaccinated), after weekend press reports pointed to an imminent announcement re: the matter. YM -7.0 and XM -3.5 come the bell, off worst levels after the space sold off post-NFP.