Narrow Ranges for Core FI Overnight

Tuesday made for another tight Asia-Pac session for T-Notes, last unch. at 138-05+, with a rally in global equity markets keeping a lid on the space during the session. The cash space saw some marginal twist steepening. Eurodollar futures sit -0.25 to +0.5 through the reds, with a ~22K lift in EDH2 providing the dominant flow during Asia-Pac hours. As a reminder, Tsy yields finished Monday either side of unchanged, with little in the way of meaningful deviation from prior settlement levels evident across the curve come the bell. Markets continued to trade around the cross currents of vaccine positives vs. short-term economic pain, with sizeable month-end extension estimates/Tsy +ve rebalancing flows also in the mix (although the traditional month-end window saw limited price action, perhaps owing the recent holiday interruptions).

• JGB futures edged higher during Tokyo trade, finishing +7, with the long end underperforming as the curve bull steepened amid supply headwinds in the form of today's 10-Year and Thursday's 30-Year JGB supply. Today's auction saw solid price metrics, with the low price coming in a touch above dealer estimates, alongside a narrow tail, although the cover ratio slipped to the lowest level seen at a 10-Year JGB auction since September (with the September level representing a multi-year low).
• There was no movement for the Aussie bond space over the release of the RBA's latest monetary policy decision. The guidance passage was a cut & paste from the previous statement, while the Bank's language surrounding its purchase scheme and impact on the AUD was very matter of fact. Elsewhere, its tone surrounding the local economy was still cautious, while it flagged the broader risk backdrop as the driver behind the bid in AUD/USD (which is of course well documented). It was also keen to stress the need for an appropriate monetary-fiscal policy mix. All in all, it was very vanilla, with little of note to go off. Now we move to the Governor's appearance in Canberra tomorrow. YM unchanged, XM -2.0 at the bell. Swaps have generally narrowed marginally vs. ACGBs across the curve.