Two-Way flows In Tight Ranges In Asia

TYZ1 drifted lower early on, with a recovery from lows in oil futures and a ~0.3% uptick for e-minis applying some light pressure, in addition to the regional reaction Friday's comments from Fed Vice Chair Clarida & Governor Waller, as they flagged the potential for more aggressive tapering from the central bank. The truncated Tsy supply schedule owing to the Thanksgiving holiday provided another likely source of pressure (2- & 5-Year Tsy supply is due on Monday). Still, the space recovered from lows, with the lack of a wider bid in Asia-Pac equities (ex. China, which benefitted from increased speculation re: the prospect of targeted easing from the PBoC) and continued worry re: the COVID situation in Europe providing some interest as we moved through the session. TYZ1 last -0-05 at 130-23, 0-04+ off lows. Cash Tsys run 0.5-1.0bp cheaper across the curve, with 2s and 3s leading the way lower ahead of the aforementioned supply. Existing home sales data & the latest Chicago Fed national activity index reading hit later today.

• JGB futures initially eased back from their overnight highs, aided by the aforementioned cheapening in the U.S. Tsy space, although Tokyo morning trade was relatively limited. The contract then recovered alongside Tsys, to last deal +11 on the day. Cash JGB trade sees the major benchmarks running 0.5-1.5 richer vs. Friday's close. 7s provided the strongest point on the curve throughout the day, pointing to a futures-driven round of outperformance, while the long end lagged, perhaps on carry over worry re: JGB issuance to facilitate the well-documented round of incoming fiscal stimulus. A liquidity enhancement auction covering off the run 1- to 5-Year JGBs provided solid results. Elsewhere, a reminder that Japan will observe a market holiday on Tuesday, which may have limited afternoon trade.
• Aussie bond futures softened a little vs. early Sydney levels as crude oil futures moved off lows and U.S. Tsys came under some modest cheapening pressure, leaving YM -0.5. and XM +2.0 at the bell. The long end of the cash ACGB curve sits ~2.5bp richer on the day, with no direct impact from the slide in the cover ratio at today's ACGB Jun-51 auction (pricing at the auction was still comfortably through prevailing mids at the time of supply). A sizeable round of ACGB coupon payments and the latest round of scheduled ACGB purchases from the RBA did little to support the space.