Tsys Edge Away From Friday's Lows

T-Notes have consolidated above unchanged levels after S&P 500 e-minis failed to hold onto early gains above 3,700. The contract last deals +0-03 at 137-15, a touch shy of best levels after the space looked through the latest round of Chinese trade data. Cash Tsys run 0.2-1.6bp richer across the curve, with some light bull flattening at the fore. Some have pointed to the seemingly traditional Asia-Pac regional demand for cash Tsys as a source of the bid after Friday's sell off. Flow has dominated in what has been a quiet session for broader macro headlines, with what seemed to be profit taking of a 5.0K delta hedged USF1 172.00/170.00 put spread position on block. Elsewhere, there was 10.0K block sale of the TYF1 137.50/137.00 put spread on block, which was touted as further profit taking and was coupled with a 10.0K block trade in the TYG1 136.50/138.50 risk reversal (buying puts to sell the calls).

• JGB futures have edged away from overnight session lows, last sitting 3 ticks below Friday's Tokyo settlement levels. Cash trade seemingly lacked a cohesive sense of direction across the broader JGB curve, with yields sitting either side of unchanged. The latest round of BoJ Rinban operations saw the Bank leave the purchase sizes of the respective buckets unchanged, with the following cover ratios: 1-3 Year: 2.77x (prev. 2.55x), 25+ Year: 4.20x (prev. 7.46x). Elsewhere, Japanese PM Suga laid the way for comments re: fiscal matters in the coming days, as had been outlined in the local press in recent weeks, with the focus of any such measures seemingly set to fall on corporate liquidity provisions.
• Over in Australia, the move away from lows in U.S. Tsys allowed the local bond space to recover from worst levels, with the RBA's A$1.0bn purchase of ACGB Apr '24 (to enforce its 3-Year yield target) providing a source of local incremental support. YM last -0.5, with XM -4.0. The ACGB space shrugged off semi-government credit rating downgrades for both Victoria & NSW, courtesy of S&P and a less than inspiring cover ratio in the final round of conventional ACGB supply from the AOFM for calendar '20.