• Asian equity markets traded mixed with the region failing to fully sustain the impetus from the positive performance across global counterparts
• Silence from Evergrande and lack of coupon payments for its offshore bonds, stirred uncertainty for the company
• The DXY holds on to 93.00 status with FX markets relatively contained ahead of the European session
• White House Budget Office will reportedly tell federal agencies to begin preparations for a government shutdown
• Looking ahead, highlights include German IFO, US New Home Sales, Fed's Williams, Mester, Clarida, Powell, George, ECB's Elderson, BoE's Tenreyro, supply from Italy

CORONAVIRUS UPDATE

US CDC advisory group unanimously voted to recommend distributing Pfizer (PFE) and BioNTech’s (BNTX) COVID-19 booster shots to older Americans and nursing home residents, clearing the way for the agency to give the final approval. It also voted (13 Yes vs 2 No) to recommend the Pfizer vaccine booster for people aged 50-64 with underlying medical conditions and voted (9 Yes vs 6 No) to recommend booster for those aged 18-49 with underlying medical questions, although it voted (5 Yes vs 10 No) against recommending booster for 18-64 year olds that work or are in institutions where risk of infection is high, based on individual benefit/risk. (Newswires/CNBC)

Japan is reportedly mulling easing COVID-19 restrictions in 13 prefectures on a trial basis. (Kyodo)

ASIA

Asian equity markets traded mixed with the region failing to fully sustain the impetus from the positive performance across global counterparts after the silence from Evergrande and lack of coupon payments for its offshore bonds, stirred uncertainty for the company. ASX 200 (-0.4%) was negative as underperformance in mining names and real estate overshadowed the advances in tech and resilience in financials from the higher yield environment. Nikkei 225 (+2.0%) was the biggest gainer overnight as it played catch up to the prior day’s recovery on return from the Autumnal Equinox holiday in Japan and with exporters cheering the recent risk-conducive currency flows, while KOSPI (-0.1%) was lacklustre amid the record daily COVID-19 infections and after North Korea deemed that it was premature to declare that the Korean War was over. Hang Seng (-0.2%) and Shanghai Comp. (-0.1%) were indecisive after further liquidity efforts by the PBoC were offset by concerns surrounding Evergrande after the Co. failed to make coupon payments due yesterday for offshore bonds but has a 30-day grace period with the Co. remaining quiet on the issue. Finally, 10yr JGBs were lower on spillover selling from global counterparts including the declines in T-notes as the US 10yr yield breached 1.40% for the first time since early-July with the pressure in bonds also stemming from across the Atlantic following a more hawkish BoE, while the presence of the BoJ in the market today for over JPY 1.3tln of government bonds with 1yr-10yr maturities did very little to spur prices.

PBoC injected CNY 120bln via 14-day reverse repos with the rate at 2.20% for a CNY 70bln net injection. (Newswires) PBoC set USD/CNY mid-point at 6.4599 vs exp. 6.4595 (prev. 6.4749)

US senior official said many countries in the Indo-pacific see US steps in the region as a necessary response to China's rapid and dramatic military build up which has triggered anxiety in the Indo-Pacific, while Friday's Quad Summit will build on themes from the March summit and will have much to say about the next steps with respect to vaccines in the Indo-Pacific. In other news, US Commerce Secretary Raimondo said the Biden administration will conduct further action against Huawei if necessary and Democratic Senator Ossoff said US needs to cut dependence on Chinese solar panels, while China's Commerce Ministry has terminated the anti-dumping investigation on PVC (polyvinyl chloride) imports from the US. (Newswires)

Japanese Economic Minister Nishimura said the first meeting for UK's inclusion to the CPTPP will be held on September 28th and said that Taiwan's application to join CPTPP is welcomed. In relevant news, China Global Times tweeted that Vietnam is ready to share information and experience with China in joining the CPTPP, whereas it will closely consult other signatories on membership requirements regarding Taiwan’s application, citing Vietnam's Foreign Minister. (Newswires/Twitter)

• Japanese National CPI YY (Aug) -0.4% vs. Exp. -0.3% (Prev. -0.3%)
• Japanese National CPI Ex. Fresh Food YY (Aug) 0.0% vs. Exp. 0.0% (Prev. -0.2%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Aug) -0.5% vs. Exp. -0.4% (Prev. -0.6%)

UK/EU

UK Chancellor Sunak is on course to tighten financial regulations following the Greensill scandal. (FT)

US Secretary of State Blinken said he intends to work closely with French Foreign Minister Le Drian on bilateral relations and noted that rebuilding ties with France will take time and hard work. In separate news, EU Commission said its officials will attend a trade and technology council meeting in the US next week. (Newswires)

German Chancellor Merkel's Conservative bloc +1% to 23% and SPD were unchanged at 25% in the latest FGW opinion poll for ZDF. (Newswires)

• UK GfK Consumer Confidence* (Sep) -13 vs. Exp. -8.0 (Prev. -8.0)

FX

In FX markets, the DXY weakened yesterday and briefly declined beneath the 93.00 level to wipe out all the gains from the recent FOMC announcement with the greenback pressured amid gains in risk assets. There were several pertinent comments from Washington with US Senate Majority Leader Schumer noting that the White House and Congress have “an agreement on a framework” on the taxes to pay for the reconciliation package and House Speaker Pelosi said they will keep the government open and pass a stopgap funding bill. Pelosi also expressed confidence in the House passing the USD 1tln BIF bill but did not say whether the vote will proceed as scheduled on Monday. Furthermore, the White House Budget Office will reportedly tell federal agencies to begin preparations for a government shutdown. EUR/USD stalled overnight near resistance at 1.1750. GBP/USD marginally retraced some of the advances from the more hawkish than expected BoE meeting. USD/JPY remained above 110.00 after coat-tailing on the recent haven outflows and with the latest CPI data mixed in which Core CPI printed flat as expected, while antipodeans were little changed but held on to most of the prior day’s gains with AUD/USD oscillating near the 0.7300 handle and with NZD/USD contained after mostly softer trade figures.

• New Zealand Trade Balance (Aug) -2144M (Prev. -402.0M, Rev. -397M)
• New Zealand Exports (Aug) 4.35B (Prev. 5.75B, Rev. 5.77B)
• New Zealand Imports (Aug) 6.49B (Prev. 6.16B, Rev. 6.17B)

COMMODITIES

Commodities were rangebound overnight with WTI crude futures kept afloat by support at the recently reclaimed USD 73/bbl level after it was propped up yesterday by the heightened risk appetite on Wall St and recent USD weakness. Gold nursed some of the prior day's losses after having suffered from the haven outflows and rising yields, while copper was uneventful with price action continuing on its recent sideways trajectory.

Qatar marine crude cargo of 951k bbls was bid at USD 65/bbl and Forties crude cargo of 1.1mln bbls was also bid at USD 65/bbl in the first China reserve auction, while China failed to auction 2.95mln bbls of Murban crude as there were no bids, according to sources. (Newswires)

GEOPOLITICAL

US official said all members in the nuclear deal other than Iran have made clear Vienna talks need to resume, while Iran has not yet given date for resumption and the official repeated that the window of opportunity will not be open forever. (Newswires)

North Korea said declaring the Korean War over is premature. North Korea later stated that hostile policy and double standards should be scrapped before discussing ending the Korean War, although it added that it has a willingness to improve inter-Korean ties. (KCNA)

US

Treasuries closed steeper across the curve after an earlier BoE-accentuated bear-flattener got trumped by long-end liquidations on progress regarding the on the taxes to pay for the reconciliation package. By settlement, 2s +1.9bps at 0.259%, 3s +2.9bps at 0.523%, 5s +6.2bps at 0.929%, 7s +7.2bps at 1.217%, 10s +7.7bps at 1.408%, 20s +7.4bps at 1.870%, 30s +7.5bps at 1.923%; TYZ1 volumes were above average and even stronger than Wednesday (FOMC day). Inflation breakevens led the rate rise amid 5yr TIPS +0.2bps at -1.622%, 10yr TIPS +2.5bps at -0.926%, 30yr TIPS +3.0bps at -0.298%. SOFR and EFFR both unchanged at 5bps and 8bps, respectively, as of September 22nd. Treasury pressured extended from the London open, with T-Notes extending lower to find support around 132-25. There was then a red-herring of a bid for govvies that emerged on the back of WSJ reports that China had told local governments to prepare for a potential collapse of Evergrande. T-Notes found resistance at 133-00 before transatlantic pressures from the BoE resumed the selling, with the Bank noting that the case for policy tightening had improved, seeing Sterling markets price a more aggressive rate hike cycle with 5yr Gilt yields making new COVID highs. NY participants accentuated the Treasury curve's bear-flattener on their arrival as 5s led the selling, with eyes on the June peak of 0.962%, ahead of the April/COVID-peak of 0.988%. 10s were testing key support at 1.37%, before fresh impetus on Senate Majority Leader Schumer's comments about the reconciliation bill being close to completion ignited a wave of long-end sales, turning the earlier bear-flattener into a steepener as 30yr yields catapulted higher, rising 10bps from their lows above 1.90%, and as result, gave enough momentum to take the 10yr above 1.40% for the first time since early July. Desks were also citing the Fed's latest hawkish pivot as adding support to the selling, in something akin to a delayed taper tantrum. T-Notes hit lows around 132-12 as Europe departed, hovering around the level into the later settlement. T-note (Z1) futures settle 19+ ticks lower at 132-12.

White House Budget Office will tell federal agencies to begin preparations for the first shutdown of the US government since the pandemic began, as lawmakers on Capitol Hill struggle to reach a funding agreement, according to the Washington Post. It was also separately reported that the White House was looking to meet with senior congressional staff on Thursday regarding spending measures but that nothing was finalised. (Newswires/Washington Post)

US Rep. Gottheimer (Dem) said there is no sign the Monday infrastructure vote will be delayed and there were separate comments from US House Rep. Neal (Dem.) that tax changes have been advanced by the House Committee in the Democrats' framework. In relevant news, Rep. Don Bacon is the latest Republican to say he'll vote for the Senate's bipartisan infrastructure bill next week, although Politico noted that this support comes despite formal opposition of GOP leaders and he may not have much GOP company. (Newswires/Politico)

US Commerce Secretary Raimondo said it is time to get more aggressive on semiconductors chips shortage and she is optimistic the US could make incremental progress in the next few months on the chip shortage, while other reports noted that the White House is mulling using the Defense Production Act to force semiconductor related companies to provide data such as inventory and sales. (Newswires)