Tsys Cheapen After Long Weekend, RBA Tapers, JGBs Outperform

T-Notes pushed through Monday's trough in overnight trade, before recovering from lows to last trade -0-04+ at 133-08, although the break of yesterday's low means that bears are now targeting the nearby 100-DMA support level. Cash Tsys experienced some twist steepening, with 2s seeing very modest richening, while 7+-Year paper cheapened by ~1.5bp. Headline flow remains light, but today's Asia-Pac session gave regional participants their first opportunity to trade cash Tsys in the wake of Friday's NFP report, so the moves may represent some post-data positioning. The uptick in regional equity markets will also be adding some light pressure to the space, with the post-RBA ACGB impetus allowing the space to move away from cheaps. Asia-Pac flow was headlined by a 2.5k block sale of TYZ1 futures. 3-Year Tsy supply headlines locally on Tuesday.

• JGBs meandered through the morning session after the early twist flattening, with futures supported, last +8 on the day. Comments from Japanese Finance Minister Aso failed to move the needle, as he pointed to a need to balance economic support with fiscal discipline, he also identified the need to boost government revenue while limiting spending. Aso noted that he doubts such measures would promote a weaker JPY and inflation owing to Japan's financial standing. Cash Jgbs saw some outperformance in the belly, which richened by 1.0-1.5bp. The lead up to and results of this afternoon's 30-Year JGB supply may have limited the longer end of the curve a little. The auction 30-Year JGB supply sees the cover ratio hold steady around the 3.00x mark (6-auction average 3.18x), while the tail narrowed a touch vs. the prev. auction as the low price matched broader expectations (proxied by the BBG dealer poll). All in all, it wasn't the firmest auction.
• Aussie bond futures knee-jerked lower on the RBA's decision to maintain its decision to implement a taper of its bond purchases in the coming days, but recovered on the fact that the guaranteed life of the previously outlined A$4bn/week bond purchases now runs until February '22 (it was previously set to be revisited in mid-November), with the Bank pointing to an increase in economic uncertainty and suggesting that the pace of the economic bounce-back is likely to be slower than that seen earlier in the year. YM & XM now print at unchanged levels.