U.S. Fiscal & Saudi Oil Matters Pressure Tsys, JGBs Soften

Core FI markets were seemingly happy to operate against the tone set during the first half of Asia-Pac trade, with little in the way of tier 1 headline flow evident since the re-open, leaving the U.S. Senate's passage of an amended COVID relief Bill and oil market developments that became apparent over the weekend (a Yemeni Houthi missile attack on Saudi Aramco facilities, which didn't seem to harm output) in the driving seat.

• T-Notes -0-09 at 132-02 at typing, while the belly underperforms in cash trade, with 7s sitting ~2.0bp cheaper on the day, although the space is off intraday cheaps with e-minis now in negative territory, more than reversing their early gains.
• JGB futures run 35 ticks softer vs. settlement, with a large chunk of Friday's post-Kuroda rally now unwound. The belly once again proves to be the laggard here, suggesting the move may be futures driven, with 7s running ~2.5bp cheaper on the day, while super-long swap spreads have widened by ~2bp. Focus remains on the previously flagged address from BoJ Deputy Governor Amamiya, although scope for any notable deviation vs. the thoughts outlined by BoJ Governor Kuroda re: the permitted 10-Year JGB yield band back on Friday seem limited.
• Aussie bonds are the outperformers, even with the RBA refraining from conducting 3-Year yield target enforcing operations (see earlier bullets for details), with some pointing to an article from the AFR's RBA watcher Kehoe (which focused on the Bank's view on NAIRU and need to see actual not expected developments in the labour market and inflation) as a driving factor there. YM +3.0, XM +6.0, with the Aussie/U.S. 10-Year yield spread tightening back below 20bp early this week.