U.S. Tsys Flat, JGBs & ACGBs A Little Softer

T-Notes held to a narrow 0-03+ range in Asia-Pac hours, shaking off continued regional worry surrounding trouble property developer China Evergrande/pressure on the Hang Seng & equity indices in mainland China. TYZ1 +0-01 at 133-13+, with cash Tsys virtually unchanged across the curve. A 5.0K block buyer of the TYV1 132.75/132.25 put spread dominated flow in the Tsy space, while the short end saw a 5.0K screen lift of the EDM2/U2 spread. Thursday's NY session is set to bring retail sales data for August, the latest round of weekly jobless claims figures and the monthly regional m'fing survey from the Philadelphia Fed.

• Cheapening pressures crept into the JGB space in the wake of the latest round of 20-Year JGB supply. The auction saw the low price meet broader dealer expectations (as proxied by the BBG dealer poll), although the remaining metrics surrounding the auction were nowhere near as firm. The length of the tail widened a little vs. the prev. round of 20-Year supply, while the cover ratio eased (moving back below the 6-auction average of 3.50x), printing at the lowest level witnessed at a 20-Year auction since February in the process. It looks like supply worry and the lack of outright yield on offer may have outweighed the carry and roll proposition/recent, modest cheapening. That left futures -9, while 7+-Year paper cheapened by ~0.5bp in cash trade, with shorter dated paper little changed on the day. 30- & 40-Year swap spreads widened, aiding the pressure. Domestic political headlines continue to be observed but had little impact on the space.
• In Sydney, a quick but contained tick lower for XM saw the contract show below its early Sydney lows, with no news flow apparent at the time. The move may have been related to hedging surrounding the pricing of TCV's new Sep '35 sustainability bond (A$2.5bn in size), with details crossing the wires a little while after. This paper headlined the continued steady round of A$ issuance witnessed in recent sessions. Elsewhere, the larger than expected fall in headline employment in Australia during the month of August provided very little market impact, as hours worked fell, while the drop in the participation rate outweighed the headline fall, resulting in a surprise downtick in the unemployment rate. The market could look through the release given the fact that policymakers expect a swift, sharp bounce back for the economy once COVID restrictions are unwound. YM -2.8 & XM -4.4.