Tight Asia Ranges For Core FI

T-Notes operated in a narrow (0-04) range in Asia, drawing very modest support from the downtick in e-minis. The latter sit 0.3-0.6% lower, on the back of the latest North Korean missile launch and another round of weakness in Chinese equities (driven by further regulatory oversight on the tech sphere). TYH2 last +0-04+ at 129-13+. Cash Tsys run little changed to ~2bp richer, with 30s outperforming. Broader headline and market flow remains fairly limited. NY hours will see the release of ADP employment data and the minutes from the FOMC’s December meeting. Re: the latter, markets will be looking for any discussion on how soon the central bank may hike rates after the tapering process is concluded and further details surrounding balance sheet normalisation.

• The JGB space coiled during Tokyo trade, with cash yields -/+0.5bp vs. Tuesday’s closing levels come the bell (mostly richer). Futures unwound their overnight losses as U.S. Tsys nudged higher on the aforementioned drivers. The latest round of 10-Year JGB supply passed smoothly, with the low price topping broader dealer expectations as the tail narrowed incrementally vs. the Dec auction, while the cover ratio nudged higher, moving above its 6-auction average. JGB futures ticked higher in the wake of the auction, with demand no doubt supported by the carry and roll aspect that we flagged in our auction preview. Still momentum faltered a little into the close, with the contract finishing -1 on the day.
• Aussie bonds held onto the overnight steepening impetus, with a lack of notable local headline flow leaving the space at the mercy of broader macro drivers. YM unch. & XM -3.5 at the bell. The longer end of cash ACGB curve has cheapened by the best part of 5bp. Soft ANZ job ads data (accompanied by positive revisions) did little for the space, with the data provider noting that “the record employment gain of 366,100 in November was likely a significant factor behind the fall, but we can’t rule out some dampening effect from Omicron. Still, Job Ads are 4.2% above the pre-Delta-lockdown peak in June 2021 and 36.8% above the pre-COVID level.”