Russia-Related Angst Extends In Asia

U.S. Tsys were well bid in Asia, gapping higher on the open on worry re: Ukraine. The space was subjected to several rounds of upward pressure in Asia, but sits shy of best levels ahead of European trade. TYH2 last dealing +0-13 (vs. Friday’s settlement) at 127-02+. Meanwhile, cash Tsys run 1.5-7bp richer across the curve after the elongated weekend, with 10s leading. There hasn’t been much in the way of game changing headline flow since the Asia-Pac re-open, with some of the Western nations still clearly cognisant of the risks surrounding the potential for Russia to push deeper into Ukraine. Early Asia trade saw some quarters suggest that the Russian-backed separation of Luhansk and Donetsk (accompanied with the official movement of the Russian military into the separatist regions, on “peacekeeping” business) may represent the end game when it comes to the standoff, which may have helped the pullback from early extremes when it came to broader risk aversion. Still, the lack of finality that is apparent at present means that headline risk re: the matter remains at the forefront of participants’ minds, leaving a defensive imprint on U.S. Tsy/e-mini trade. 2x block buys of FVJ2 118.25 calls (+5K apiece) headlined on the flow side, with TYH2 operating on over 280K lots since the re-open. House price data, flash Markit PMI readings, Richmond Fed m’fing data and the latest round of conference board consumer confidence readings are all due during Tuesday’s NY session. Elsewhere, we will also see the latest round of 2-Year supply, in addition to Fedspeak from Bostic (’24 voter).

• Tokyo trade saw JGBs richen, with futures closing +20, just shy of best levels. Meanwhile, cash JGBs run 0.5-3.5bp richer on the day, as flattening remains in play, building on the theme observed in the last couple of sessions after the pronounced steepening witnessed in early ’22. There hasn’t been much in the way of meaningful domestic news flow. Services PPI data met broader expectations, while Finance Minister Suzuki mentioned the need to monitor the impact of overseas bond markets on JGBs. Decent enough demand at the latest liquidity enhancement auction covering off-the-run 5- to 15.5 year JGBs would have done the space no harm.
• Aussie bond futures drifted lower throughout the session, after trading higher early on. The bid was certainly less “sticky” when compared to other core FI markets. Some downward pressure crept into the space in the wake of RBA Assistant Governor Kent’s latest address (see full text here: https://www.rba.gov.au/speeches/2022/sp-ag-2022-02-22.html) as he outlined less favourable, on net, OMO terms i.e. floating rate & shorter tenor. This meant that the short end led the space lower, with YM unchanged XM +2.0 come the bell, while the IR strip was flat to 2 ticks lower at settlement.