JGB TECHS: (M5) Within Range of Fresh Cycle Lows

• Tsys futures rallied on Friday following a risk-off move as South China Morning Post reported on a new bat coronavirus study made the rounds with traders, futures were already well supported during the morning session following US data which included soft PMI services and a final University of Michigan sentiment print below estimate. TU closed +04⅜ at 102-28⅜, while TY closed +16+ at 109-22.
• Cash tsys yields closed roughly 7bps richer on Friday, with the belly of the curve out-performing slightly. The 2yr closed -7.1bps at 4.198%, while the 10yr closed -7.4bps at 4.431%. The 2s10s closed -0.5bps at 22.904.
• Hedge funds significantly covered net short positions in 5-and 10yr futures, totaling ~$17.6m/DV01, with overall short covering across the curve reaching ~$22.7m/DV01 for the week ending Feb. 18, per CFTC data. Asset managers, meanwhile, reduced long positions broadly, including $5.1m/DV01 in 5y notes and $3m/DV01 in 10y notes.
• Fed's Goolsbee downplayed the recent rise in consumer inflation expectations, stating that one month of data isn’t sufficient to draw conclusions. The University of Michigan’s survey showed long-term inflation expectations hit 3.5%, the highest since 1995, largely driven by Democratic respondents. He also emphasized the need for multiple months of data before it impacts Fed policy decisions.
• Fed-dated OIS saw a dovish trading following the risk-off move, bringing forward the first full 25bp of easing to the July meeting from the September meeting, while the market is now pricing in 45bp of easing is vs 37bp priced on Thursday.
• There isn't much on the calendar tonight, with just Chicago Fed Nat Activity Index & Dallas Fed Manf. Activity

• Gold finished Friday with a whimper failing to hit new highs.
• Despite Friday’s slow end to the week which saw Gold close at $2,936.05, Gold delivered yet another impressive week with a gain of +1.86%.
• Year to date Gold is up over 10% in 2025, delivering positive returns in every trading week of the year.
• The much-mooted revaluation of US Gold reserves touted by the US President’s team could actually be good for prices, according to BofA Head of Commodities Research (per BBG). 
• In a further bullish sign for gold yet another Central Bank has increased their gold purchases with data from Iran showing imports of 100 tonnes during their financial year, up from 30 tonnes prior (according IRNA). 

ACGBs (YM +6.0 & XM +6.0) are stronger after US tsys finished last week with solid gains. 

• US tsys finished near session bests Friday, with second-half support spurred by risk-off sentiment as wires recirculated report of a new Covid strain out of China with "pandemic potential" (SCMP)
• US stocks fell hard, DJIA back to January 21 levels while SPX Eminis and Nasdaq withdrew to last Thursday's lows. Trading desks also cited today's call-weighted option expiration, which has historically leaned toward bearish price action in the week after.
• Cash ACGBs are 6bps richer with the AU-US 10-year yield differential at +2bps.
• Swap rates are 6bps lower.
• The bills strip has bull-flattened, with pricing +1 to +6.
• RBA-dated OIS pricing is flat to 4bps richer across meetings today. A 25bp rate cut in April is given a 13% probability, with a cumulative 47bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Today, the local calendar is empty apart from the AOFM’s planned sale of A$300mn of the 4.25% 21 June 2034 green bond.  The AOFM also plans to sell A$800mn of the 3.75% 21 April 2037 bond on Wednesday and A$700mn of the 1.75% 21 November 2032 bond on Friday.