AUSSIE BONDS: Bull Steepening Still, But Off Extremes
Aussie bonds trade in a relatively contained fashion over the latest BoJ decision, with nothing in the way of BoJ surprises noted as Governor Kuroda’s tenure nears its conclusion (this was his last monetary policy meeting atop the central bank).
- YM hasn’t managed to challenge its early Sydney highs, +10.2 last, while XM managed to register a marginal fresh session high in lieu of the BoJ decision before nudging back from best levels to last trade +9.8. Cash ACGBs run 5.5-9.5bp richer, with the bull steepening moving back from session extremes, but still prevailing.
- Futures roll volume continues to tick over, with XM rolls still trading heavily on the bid. YM is a little more balanced, still, more has traded on the bid than the offer (57/43 split)
- Next week’s AOFM issuance slate holds a steady A$1.0bn issuance rate for ACGBs, with the debt agency looking to build ACGB May-34 up to size given its inclusion in the XMM3 basket (the remainder of the basket bonds have A$20.4-A$39.3bn on issue at present vs. the A$16.6bn that will be on issue for ACGB May-34 after next week’s auction).
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US TSYS: J.P.Morgan Believe 10-Year Supply Will Require Further Concession
Ahead of Wednesday’s 10-Year Tsy auction J.P.Morgan note that “despite rising 10bp since the January auction, 10-Year yields are still too low relative to fundamental drivers. Additionally, the recent pricing dynamics have run well ahead of historical trends around late Fed tightening cycles. Turning to relative value, the 10-Year sector looks fairly valued on the wings after adjusting for rate levels and curve slope. With valuations looking rich to fair we think tomorrow’s auction is likely to require a further concession from current levels.”
US TSYS: Holding Firmer
Early Asia-Pac dealing saw Tsy market participants seemingly continue to focus on the lack of firm pushback to the dovish market reaction to last week’s FOMC in Fed Chair Powell’s Tuesday address, with the late NY corporate and Tsy supply-induced cheapening aiding entry. Tsys have edged away from firmest levels in recent trade, with TYH3 last +0-05+ at 113-13, 0-02 off the peak of its 0-07+ range, while cash Tsys sit 1.5-3.0bp richer, with a light steepening move observed. The previously flagged block buy in TY futures (+1.5K) has provided the most notable flow. Macro headlines have been on the light side, with participants starting to digest the excerpts from U.S. President Biden’s State of the Union address.
US TSY FUTURES: TY Blocked
Latest block trade lodged at 01:21:40 London/20:21:40 NY:
- TYH3 1.5K lots blocked at 113-14, looks like a buyer.
