[MARKET ANALYSIS] T-notes steady after Monday's selloff; JGB futures track UST weakness

• T-notes are flat within a narrow 105-05 to 105-08 range, following Monday's decline as the easing of AI concerns prompted a return of the Treasury sell-off, alongside gains in prompt crude futures on unconfirmed Houthi attacks on Saudi oil facilities. The US data docket remains light this week, with participants looking ahead to PCE towards month-end.
• JGB futures are lower within a 125.59-125.82 range, tracking the weakness in USTs on Monday, with Japanese supply also on the docket for today.
• Bund futures are steady at 121.13 in quiet overnight trade, following Monday's pressure across European fixed income amid the civil unrest in France, which saw French yields post one of their largest one-day rises since March 2025 and the OAT-Bund 10yr spread widen to around 145bps ahead of Moody's review on Friday. Ahead, German PPI and the ZEW survey are due.

This is a cross-market rates wrap in the classic Asia-into-Europe handover format, and the read is one of consolidation after a directional move rather than a fresh impulse. The pattern on display is familiar: a risk-sentiment-driven Treasury selloff, here tied to fading AI concerns, transmits into JGBs overnight while EGBs trade their own idiosyncratic story. The French leg is the one with genuine precedent content: episodes of civil unrest in France have historically widened OAT-Bund through the political risk channel rather than the growth channel, and the spread has tended to stay elevated into scheduled rating reviews, with Moody's decision on Friday the obvious binary; prior reviews of this kind have produced outsized spread moves only when the outlook shift was not already priced. The crude angle, unconfirmed reports of Houthi strikes on Saudi facilities, fits the established pattern where unverified supply-risk headlines lift prompt futures and add a mild bear-steepening impulse to Treasuries via inflation breakevens, a move that has often faded if confirmation fails to arrive. Japanese supply today is the mechanical follow-on for JGBs, with auction tails the tell for whether domestic buyers step in at cheaper levels. The calendar does the rest: German PPI and ZEW offer second-tier EGB direction, while the light US docket leaves Treasuries hostage to headline flow until PCE at month-end, a sequencing that has historically compressed ranges in the interim.