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Pullback Considered Corrective


Holding Above Recent Lows


BLOCK, Large 3Y Midcurve Put Condor

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Tsys looked through an FT report which noted that U.S. President "Biden suggested he hold a face-to-face summit with Chinese president Xi Jinping during a 90-minute call last week but failed to secure an agreement from his counterpart, leading some US officials to conclude that Beijing is continuing to play hardball with Washington." Meanwhile, softer than expected Chinese economic activity data provided a very modest bid which didn't last. That left T-Notes within the confines of a narrow 0-03 range overnight, last -0-02+ at 133-17, while cash Tsys are virtually unchanged across the curve. An FV/WN block flattener (-9,409 FV vs. +1,362 WN) headlined on the flow side in Asia. NY trade will see the release of lower tier data, headlined by the Empire manufacturing and industrial production readings.

  • JGB futures sit 10 ticks higher on the day, aided by softer offer/cover ratios in the latest round of BoJ Rinban operations covering 1- to 10-Year JGBs. Cash JGBs sit little changed to ~1.5bp richer across the curve, with the 3- to 10-Year zone outperforming, aided by the Rinban ops, while the longer end was a little more subdued ahead of tomorrow's 20-Year JGB supply. Local news flow remains centred on the political space. Elsewhere, headlines pointed to the potential for a multi-tranche round of corporate supply from Softbank.
  • Most of the early bid in the ACGB space held with little in the way of outright explanations offered/observed re: the move higher. YM +2.2, XM +4.0, while the longer end of the cash ACGB curve has firmed by ~4.5bp. On the re-opening front, a Yahoo Finance interview has confirmed that "Qantas has scheduled flights to London, Los Angeles, Vancouver, and Singapore to commence from 18 December." This is in line with rough timelines that had been outlined previously, resulting in no tangible market impact. We also saw Treasurer Frydenberg point to the potential for an RBA review post-election after such suggestions were made by the OECD.