Vaccine Headlines Lend Light Support To FI

{US}{JN}{AU} BOND SUMMARY: Negative vaccine headline flow reintroduced itself in Asia-Pac trade, as STAT News noted that "the study of Johnson & Johnson's Covid-19 vaccine has been paused due to an unexplained illness in a study participant." This weighed on e-minis after Monday's rally (e-minis were already ticking lower as cash Tsys re-opened flatter), with yesterday's rally being a product of market pricing surrounding the odds of a blue wave in the November election, and the fiscal stimulus that such a result would entail. Still, T-Notes held to a narrow 0-03+ range, last +0-00+ at 138-29+, with cash Tsys trading 0.4-1.9bp richer across the curve amid bull flattening, albeit with the space back from richest levels.

• JGB futures failed to gain any traction above the 152.00 psychological level, even with broader defensive flows in play. The contract last trades +2, just shy of 152.00. Results from the latest liquidity enhancement auction for off the run 15.5-39 Year JGBs were firmer than the previous offering, as the tail and spreads narrowed, while the cover ratio nudged higher. Cash trade saw 5s outperform on the day, with swaps generally wider vs. JGBs across the curve. The long ends of both the JGB and swaps curves generally underperformed.
• There was little in the way of meaningful activity in the Aussie Bond space, with most of the focus going into assessments surrounding Sino-Aussie coal trade matters. Curve a touch flatter, with YM unchanged and XM +1.0.