Off Worst Levels, But Core FI Biased Lower In Asia

The earlier impetus from the combination of weakness in ACGBs, U.S. fiscal matters (President Biden become more optimistic on the resolution of a spending deal within the Democratic party) and the previously outlined Chinese state media headline flow surrounding the market's understanding of diminished odds of a RRR cut from the PBoC during the remainder of '21 has subsided a little, allowing the space to find a bit of a base. E-Minis have reversed their early, modest gains, and now trade little changed. TYZ1 last trades -0-03 at 130-15, while cash Tsys run little changed to 2.0bp cheaper across the curve, with a more traditional round of bear steepening coming the fore after the early, belly-led weakness. A 2,125 lot block buy of FV futures was seen. In the short end there was a covered 40K buyer of the EDH2 99.625/99.500 put spread. A raft of Fedspeak & 20-Year Tsy supply will headline in NY hours

• JGB futures -5 at typing after extending on their overnight weakness, off of morning lows, in line with the broader theme witnessed in the core global FI space. Bears have so far failed to force a test of the month-to-date low (151.18). Cash trade saw mixed performance across the curve, with modest firming for 2s and 30+Year paper while the remainder of the major benchmarks trade 0.5-1.0bp cheaper. Local headline flow remains strangely muted, outside of an eruption of the Mt. Aso volcano. The latest round of BoJ Rinban operations drew the following offer/cover ratios: 1- to 3-Years: 3.07x (prev. 2.77x), 3- to 5-Years: 2.80x (prev. 2.74x), 5- to 10-Years: 1.86x (prev. 2.18x), 25+-Years: 5.79x (prev. 5.40x).
• Yesterday's move from the RBA re: promoting the facilitation of its yield curve targeting mechanism by upping the costs of borrowing the relevant bonds for short selling purposes supported the short end of the curve in relative terms, although pressure spilled over from a technical break lower in XM at one point, before both recovered from worst levels as core FI found a bit of a base. YM trades +2.0 on the day, with XM -7.0.