Lower Tsy Futures Drive Broader Price Action

Tsy futures were pressured from the off in Asia-Pac trade (cash markets are closed until the London open owing to a Japanese holiday), as Asia reacted to Friday’s post-NFP moves and greater chances of further fiscal stimulus in the U.S. This outweighed China-related COVID worry and reports out of Cyprus pointing to several cases of a combination of the Delta & Omicron COVID strains. The latter had little lasting impact on broader risk appetite, with the scientist that flagged the developments having to downplay speculation that the combination came about on the back of contamination in the testing lab. TYH2 -0-07+ at 128-02 as of typing, after the contract threatened to test the psychological 128-00 at one point overnight. On the sell side, Goldman Sachs frontloaded their Fed rate hike view (now looking for 4 25bp hikes in ’22 vs. 3 previously), while they rolled forward their call re: the start of B/S normlisation on the part of the central bank. A screen seller of the EDH4/M4/U4 butterfly {~5K) headlined on the flow front. There isn’t much of note on the U.S. docket on Monday, which may mean that any rumblings from the Russia-related discussions in Geneva may receive higher scrutiny vs. the norm.

• The Aussie bond space traded at the whim of the broader Tsy-driven impetus, leaving YM -2.0 & XM -6.5 at settlement, as the weakness observed in the final overnight session of last week extended. The 10- to 12-Year zone provided the weak point on the cash ACGB curve. In local news, Australian PM Morrison tipped his hat to the already known dampening of consumer demand, while stressing that it is too early to make predictions re: the economic impact of Omicron. We also saw the RBA return to ACGB buying operations, as scheduled. A$IG supply continues to tick over, with CBA & the AIIB providing the deals of note after flagging the potential for such issuance last week.