Winding Into Christmas

A very limited Asia-Pac session for U.S. Tsys, with the cash market little changed at typing, while T-Notes sit +0-01 at 137-25+, sticking to a 0-02+ range. Trade was non-committal as we moved towards the Christmas break, with continued focus on Brexit and the fiscal situation in DC.

• Little in the way of consistent movement was seen across the JGB curve, with yields marginally mixed, while futures extended on their overnight losses, last 14 ticks below yesterday's settlement levels. News flow has generally been light, with continued focus on the situation surrounding former PM Abe that we flagged earlier (although there has been little spill over for markets on that front). A firm enough 2-Year JGB auction was seen, with the low price topping dealer expectations at the margin (BBG survey pointed to 100.450), while the cover ratio moved back towards more normal levels and the tail narrowed, although we must stress that last month's 2-Year offering was poorly received, which muddies the usual comparative benchmarking. Real yield dynamics and collateral matters likely helped takedown.
• The overnight bear steepening for Aussie bond futures ultimately held/extended in a holiday shortened Sydney session, with little in the way of notable macro headline flow evident. That left YM -1.0 at the close, with XM -6.5, as the latter ticked to fresh lows into the closing bell. The move wasn't all offshore driven, with the AU/U.S. 10-Year yield spread widening by ~2bp. The cash curve ran steeper, with swaps tightening across the curve in the main. Bills finished unchanged to -1 through the reds, with 3-Month BBSW fixing unchanged, at all-time lows of 0.010%.