Twist Flatter In Asia, Some Vol. Evident

A flurry of defensive flows were evident during early Asia-Pac trade, with TYM2 moving through Wednesday’s peak and e-minis on the backfoot after a couple of COVID infections were found outside of Shanghai’s quarantine system (resetting the clock re: the move towards a loosening of social mobility restrictions in the city), while North Korea also declared its “first” case of COVID, triggering a lockdown across all cities in the country. We also saw Chinese property developer Sunac note that it has missed interest payments on several US$ bonds (the grace period on one of the payments has now elapsed, with no payment, which could trigger cross-default on other offshore debt), with liquidity issues remaining evident in the sector.

• Still, the space quickly moved away from richest levels as risk assets regained some poise and e-minis moved back into positive territory, although there was a lack of meaningful headline flow to trigger such a move.
• TYM2 is now operating just below the middle of its 0-15+ Asia-Pac range, with e-minis dealing around neutral levels. The former is +0-01+ at 119-10 on volume of ~160K. Cash Tsys have twist flattened, pivoting around 3s, with 2s running ~1bp cheaper while 7s provide the firmest point across the curve, sitting 2bp richer. It would seem the twist flattening impetus witnessed after yesterday’s CPI print left its imprint on regional participants, despite the aforementioned vol.
• Later in the session we saw one of the PBoC Vice Governors note that the Bank is making growth stabilisation a “higher priority” while also flagging the Bank’s guidance re: lower loan interest rates.
• PPI & weekly jobless claims data are due during NY hours, in addition to 30-Year Tsy supply.