JGBS: Massive Rally Led By The Belly, 10YY Falls 40bps This Week

• +4,559 UXY at 114-02+, post time 15:03:15 AEST. DV01 $413k. Contract last trades -10+ at 114-03+, vs session lows of 113-28+, the contract hit a high of 115-12 overnight.

• Tsys curves have twist-steepened throughout the session, yields are -2bps to +2.5bps. The long-end is underperforming today, with the US & WN contracts trading below Tuesday's lows. TU is -01¼ at 103-16+, while TY is trading -10 at 110-30.
• The 2yr is -1.5bps at 3.976%, while the 10yr is +1.1bps at 4.256%. The 2s10s is +2.5bps at 27.5bps, and are now steepened ~9bps since Monday.
• Concerns over US tariffs' economic impact have fueled bullish Treasury bets, with JPMorgan’s client survey showing the most bullish positioning in 15 years. Large block trades and surging call option activity suggest traders are targeting 10yr yields falling below 4%, with some positioning for as low as 3.85%.
• Trump has been speaking to a joint session of congress, He has spoken about cutting federal bureaucracy, fraud, and waste—highlighting DOGE. He justified the tariffs enacted today (20% on China, 25% on Mexico and Canada), framing them as tools to protect American workers, despite market turmoil, and proposed making car loan interest tax-deductible for US-made vehicles.
• On foreign policy, Trump doubled down on border security, announcing a government-wide immigration crackdown, and addressed his recent pause on Ukraine aid, shifting focus to domestic priorities. He also pushed for expanded executive authority and briefly touched on cryptocurrencies, reiterating his Sunday call for a strategic reserve, though without new details.
• Projected rate cuts through mid-2025 gaining vs. late Monday levels (*) as follows: Mar'25 at -1.4bp (-3.1bp), May'25 at -11.8bp (-14bp), Jun'25 at -27.9bp (-31.0bp), Jul'25 at -37.7bp (-42.6bp).
• Later today we have MBA Mortgage Applications, ADP Employment Change, S&P Global US Services PMI, Factory/Durable Goods Orders & ISM Services Index

ACGBs (YM -6.0 & XM -10.0) are sharply cheaper but off Sydney session cheaps.

• Q4 GDP printed exactly in line with consensus at +0.6% q/q & 1.3% y/y up from 0.3% & 0.8% in Q3.
• Cash US tsys have twist-steepened, with yields 2bps lower to 2bps higher, in today’s Asia-Pac session after yesterday’s heavy session.
• Trump, in his address to Congress, praised the drop in interest rates and pledged to balance the federal budget. He urged Congress to pass tax cuts and mentioned discussions with major US car companies. He reiterated his stance on tariffs, stating that products not made in the US will face tariffs, in some cases “rather large ones.”
• Cash ACGBs are 6-10bps cheaper with the AU-US 10-year yield differential at +11bps.
• Swap rates are 5-8bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -7.
• RBA-dated OIS pricing is 1-5bps firmer across meetings today. A 25bp rate cut in April is given an 11% probability, with a cumulative 59 bps of easing priced by year-end.
• Tomorrow, the local calendar will see Building Approvals, Private Sector Houses and Trade Balance data.
• The AOFM plans to sell A$700mn of the 1.00% 21 December 2030 bond on Friday.