JGBS: 10-Year Yields Not Budging
JGBs were little changed to 1.5p richer during morning trade, although 10-Year JGB yields remain pinned to the 0.25% level, even with the BoJ pledging to defend the top of its permitted -/+0.25% trading band over the coming days. JGB futures held on to some of their overnight gains, hitting the lunch bell +14, although pressure from the latest downtick in U.S. Tsys (taking place during the Tokyo lunch break) may apply some pressure to JGBs in early afternoon dealing, with the earlier rounds of cheapening pulling the contract further away from its overnight peak. A liquidity enhancement auction for off-the-run 15.5- to 39-Year JGBs headlines the domestic docket this afternoon.
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AUSSIE BONDS: Spill Over Remains In The Driving Seat
Spill over from the aforementioned weakness in the U.S. Tsy space drove Aussie bond futures through their respective early Sydney lows, although YM & XM have managed to find a bit of a base since, leaving them -15.0 & -12.5 at typing, with bear flattening still in play. The longer end of the cash ACGB curve has cheapened by ~10bp, while 3s provide the weakest point on the cash ACGB curve. The IR strip has followed the wider theme in bond futures, running lower, before finding a bit of a base alongside bonds, printing 6-21 ticks lower through the reds as of typing. Note that there was nothing in the way of wider reporting re: RBA Governor Lowe’s latest address, with no text release on the Bank’s website. We can only assume that there were no comments on monetary policy in the address.
JGBS: Bear Steepening, 10-Year Yields Eyed
Continued weakness in the U.S. Tsy space is spilling over into JGBs after the long Tokyo weekend, with the JGB curve bear steepening as the major benchmarks trade little changed to 2bp cheaper on the session (note there was a degree of weekend catch up and hope re: increased Japanese fiscal stimulus also embedded into price action). 10-Year JGB yields are now less than 1bp away from the 23bp mark that triggered pre-emptive action from the BoJ via fixed rate JGB operations to enforce the upper end of its permitted -/+0.25% yield trading band back in February. Futures operate a touch of worst levels of the session, last -22, with the February cycle low (149.80) providing key technical support.
US TSYS: Bear Flattening Extends In Asia
Monday’s bear flattening extends after the initial parallel sell off witnessed at the cash Tsy re-open, with 2s running ~6bp cheaper on the day, while 30s sit ~2.5bp cheaper. Paper out to 10s registers fresh cycle highs in yield terms in the process, with contracts out to UXY (in maturity terms) printing through their respective Monday lows as a result.
