Core FI Lose Allure As Sentiment Recovers

Recovery in broader risk appetite pulled the rug from under core FI as the PBOC pledged a more proactive approach to supporting domestic economy via monetary policy tools.

• T-Notes reversed earlier gains and sank into negative territory. TYM2 last changes hands -0-09+ at 119-10, pulling back from its earlier session high of 119-26+. Eurodollar futures deal 0.5-5.5 ticks lower through the reds. Cash U.S. Tsy yields bounced in the Tokyo afternoon and last sit 1.9bp-4.0bp higher, with the curve running a tad flatter. Looking ahead, durable goods orders, Conf. Board Consumer Confidence & new home sales provide local data highlights on Tuesday, with 2-Year Tsy auction also up today.
• JGB futures dipped as the BoJ conducted its regular Rinban operations and the final iteration of pre-announced fixed-rate JGB purchases. The contract extended losses after the Tokyo lunch break and last operates at 149.26, a tick shy of previous settlement. Cash JGB yields recovered towards neutral levels, albeit 30s still outperform. Japan's unemployment rate unexpectedly slipped in March, but the data is unlikely to move the needle on Thursday's BoJ policy meet. Re: today's Rinban ops, they yielded the following offer/cover ratios:
  • 3- to 5-Year: 1.80x (prev. 2.32x)
  • 5- to 10-Year: 2.71x (prev. 2.40x)
  • 25+ Year: 5.20x (prev. 4.73x)
  • 10-Year JGBis: 4.63x (prev. 2.08)
• Aussie bond futures sold off late doors in tandem with major peers, YM last +5.0 & XM +10.0 (both near session lows). Bills run -1 to +9 ticks through the reds. Cash ACGBs caught a bid as Sydney trading resumed after the ANZAC Day, but trimmed gains later in the day. Yields sit 0.8bp-4.2bp at typing, curve runs steeper as the short-end leads gains. Domestic headline flow was sparse, with all eyes already on the quarterly CPI report, due for release on Wednesday.