Risk Stabilisation Saps Strength From Core FI But JGBs Hold Firm

Some positive musings on the Omicron coronavirus variant helped stabilise risk sentiment, applying pressure to core FI space. Suggestions that the new variant has been presenting with mild symptoms so far and upbeat comments from vaccine developers prompted participants to reassess the situation, even as the WHO urged caution and a number of countries tightened border controls to slow the spread of Omicron.

• Risk stabilisation sent T-Notes lower at the re-open, with the contract last seen -0-12 at 130-25+, moving further away from Friday's high of 131-10+. Cash U.S. Tsy yields climbed across the curve and last sit 4.3-6.8bp higher, with belly underperforming. Eurodollar futures run +0.5 to -6.0 ticks through the reds. The local data docket is fairly empty today, but speeches are due from Fed's Powell, Williams & Bowman.
• JGB futures defied broader market impetus and crept higher, as Japan PM unveiled the decision to ban entry of virtually all foreign visitors from Nov 30 until further notice. Cash JGB yields are little changed across the curve, albeit the belly outperforms at the margin. Japan's retail sales posted the second monthly increase in a row, while the BoJ offered to buy 3-10 Year JGBs as part of their Rinban ops.
• Cash ACGB curve steepened a tad and yields last trade -0.5bp to +2.3bp, with 10s lagging. Aussie bond futures went offered and YM now trades unch., with XM -2.5. Bills trade +1 to -2 ticks through the reds. Australia's company operating profit beat expectations, but inventories unexpectedly shrank in Q3. The RBA offered to buy A$1.6bn of ACGBs with maturities of Apr '24 to Nov '28, but excluding ACGB Apr '24.