Tuesday's Momentum Spills Into Asia Trade

Momentum from Tuesday's session spilled over into Asia-Pac trade, allowing core FI markets to cheapen. A softer than expected Caixin manufacturing PMI survey out of China (which saw the first contractionary headline print since April '20) had little impact on the space.

• T-Notes have traded through Monday's low, with some weakness in the ACGB space adding to the pressure during a news-light round of Asia-Pac trade. The contract last deals -0-07+ at 133-07, representing worst levels of the session, while cash Tsys trade 0.5-2.0bp cheaper across the curve, with 10s leading the way lower. Looking ahead to Wednesday's NY docket, the ISM m'fing survey and ADP employment prints headline, with the latter serving as a warm up to Friday's NFP release. We will also hear from Fed's Bostic.
• Aussie bond futures were under pressure from the get-go in Sydney, although there weren't any fresh headlines to prompt the latest leg lower. Some modest pressure was then seen on the back of the firmer than expected Australian GDP data for Q2 (+0.7% Q/Q, +9.6% Y/Y), which would have taken a fair chunk of the sell-side community by surprise given relatively widespread acknowledgement of downside risks ahead of the print. Still, the post-data move hasn't been violent, given the weakness already seen during the morning. YM -4.0 & XM -9.0 at typing, with the latter hovering just above its Aug 12 low, which forms key support.
• JGB futures also moved lower as domestic participants reacted to the overnight downtick, while a bid in local equity markets applied further pressure to the space. The contract last trades -13. The major cash JGB benchmarks deal little changed to ~1.0bp cheaper across the curve, with 7s leading the weakness. Super-long end swap spread widening has been evident as footprints of long end swap paying show up in the 30- & 40-Year tenors.