Russian Reports Of Ukraine Mortar Attack On Luhansk Supports Core FI

Asia-Pac trade saw core FI markets draw a bid from unverified Russian reports which pointed to Ukraine conducting mortar and grenade attacks on the separatist region of Luhansk, as false flag fears intensified. Note that the issue has only been covered by Russian state media, with scepticism surrounding the source of the reports resulting in the paring of a chunk of the initial risk-off moves in the wider cross-asset space. Note that early Asia-Pac dealing saw U.S. officials point to a further 7K Russian troops gathering near the Ukrainian border in recent days (contrary to Russian rhetoric on the matter).

• TYH2 +0-14 at 126-08, 0-07+ off the overnight peak, with the contract operating in a 0-22+ range on a more than healthy and comfortably above average ~290K lots. Cash Tsys run 4-6bp richer on the day, with the belly leading on the curve. Looking ahead, weekly jobless claims, housing starts, building permits and Philly Fed activity data headline In NY hours. We will also get Fedspeak from Bullard & Mester, as well as 30-Year TIPS supply
• Prior to the broader risk-off move, JGB futures rebounded on the back of solid takedown of 20-Year JGB supply, after this morning’s concession-driven cheapening & steepening provided enough enticement for buyers to dip their toe into the water. Futures finished +3 after registering fresh cycle lows during the Tokyo morning. The smooth auction came against a backdrop of multi-year steeps on the curve, as well as appeal on the 10-/20-/30-Year JGB fly, in the wake of the recent buyers’ hiatus when it comes to super-long paper. Still, the cash JGB curve is steeper on the day (benchmarks sit little changed to 5bp cheaper), with the super-long end drifting back towards morning cheaps after the impulse of the auction and wider risk-off flows faded. Optically, the 1.00% yield level in 30s held firm, for now. Crucially 10-Year JGB yields didn’t top 23bp (the level which triggered the recent round of BoJ intervention).
• Aussie bond futures ticked higher on the back of the broader risk aversion, with YM finishing +4.0, while XM was 2.5 better off come the bell. Note that local labour market data provided little impetus for markets, with the unemployment rate meeting exp., headline employment beating expectations (the uptick was driven solely by part-time hiring), while hours worked tumbled on COVID cases and annual leave usage.