AUSSIE BONDS: Wider Matters At The Fore
There once again seems to be a lack of idiosyncrasies when it comes to movements in the Aussie bond space, with the space trickling lower over the last few hours. The likely swap-paying driven sell off in U.S. Tsys and a reversal in oil futures (which now trade comfortably lower after initially moving higher on the day, resulting in a downtick in stagflationary worry) has pressured the space away from best evels. That leaves YM +2.0 and XM +3.0, with the longer end of the cash curve richening by ~4.5bp on the session. Note that EFPs have ticked back towards neutral levels, perhaps on spill over from the swap payside flows flagged in the U.S. space.
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JGBS AUCTION: Japanese MOF sells Y497.5bn of 5-15.5 Year JGBs in liquidity enhancement auction:
The Japanese Ministry of Finance (MOF) sells Y497.5bn of 5-15.5 Year JGBs in a liquidity enhancement auction:
- Average Spread: -0.017% (prev. -0.020%)
- High Spread: -0.016% (prev. -0.017%)
- % Allotted At High Spread: 29.3070% (prev. 10.1289%)
- Bid/Cover: 3.895x (prev. 3.516x)
RUSSIA: Kommersant: Most Significant New Sanctions May Be Technological
"Neither the authorities, nor businesses, nor experts interviewed by Kommersant have any doubts that Vladimir Putin's decision on Donbass will lead to a sharp sanctions response from the West against Russia," writes Russian business broadsheet Kommersant in an op-ed. "The only question is whether the consequences will be 'harsh' or 'catastrophic'. The latter term usually pops up with regard to technological sanctions, around which there is the least clarity."
- "As a Kommersant source in the payment market notes, if a ban is introduced on the processing of transactions of Russian banks by American ones, money would continue to flow through banks in Europe, Asia, and Africa."
- "Traditionally, among the important threats to the financial system is the disconnection from SWIFT. However, a Kommersant source in the payment market assures that even if SWIFT is blocked, cross-border flows will not be blocked: 'SWIFT is not a payment system, it is a system for transmitting messages that such and such a payment has been sent by such and such a bank to such and such bank. As a result, transactions may be slower, but not completely stopped.'"
- "The new and most acute topic of the current crisis has become the so-called technological sanctions - possible restrictions on the supply of electronics, components, and software to the Russian Federation. According to a Kommersant source in the government, the worst option is the introduction of two-stage sanctions. In this case, the supply of both products from US companies (for example, Nvidia and Intel) and equipment manufactured using American technologies will be prohibited. There is nothing to replace them, Kommersant's interlocutor admits, you just have to 'look for new import channels.'"
- Click here to see the full report.
US TSYS: TYH2 Back Towards Best Levels
TYH2 has ticked back towards best levels after the previously flagged pullback, last dealing +0-18 at 127-07+. Meanwhile, cash Tsys run 3-8bp richer across the curve. There hasn’t been much in the way of game changing headline flow since the Asia-Pac re-open, with some of the Western nations still clearly cognisant of the risks surrounding the potential for Russia to push deeper into Ukraine. Early Asia trade saw some quarters suggest that the Russian-backed separation of Luhansk and Donetsk may represent the end game when it comes to the standoff, which may have helped the pullback from early extremes when it came to broader risk aversion. Still, the lack of finality that is apparent at present means that headline risk remains at the forefront of participants’ minds, leaving a defensive imprint on U.S. Tsy/e-mini trade.
