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Participants steered clear of safe haven assets following Tuesday's risk rout, with core FI losing shine as a result. Australian CPI data provided the main risk event of the Asia-Pac session, with ACGBs taking a hit as domestic inflation figures smashed expectations.

  • A brief foray higher allowed T-Notes to show above yesterday's best levels but proved short-lived as broader selling pressure prevailed. The contract went bid as a block but in 5-Year U.S. Tsy futures coincided with geopolitical headlines noting that a Russian ammunition depot caught fire, while China said that its navy vessels tracked a U.S. destroyer transiting the Taiwan Strait. This upswing was capped at 120-18+ and T-Notes turned their tail again amid recovery in U.S. e-mini futures. TYM2 trades +0-04 at 120-05+ as we type, with Eurodollar futures last seen 0.5-3.0 ticks higher through the reds. Cash U.S. Tsys tracked fluctuations in T-Notes, yields quickly regained poise after a brief pullback. They last sit 2.2bp-5.0bp higher, with the curve running flatter. The U.S. docket for today features flash wholesale inventories & 5-Year Tsy auction.
  • JGB futures sales ground to a halt ahead of the Tokyo lunch break but resumed thereafter, with the contract last sitting at 149.34, 2 ticks above previous settlement. Cash JGB yields are narrowly mixed as we type. The sale of 2-Year JGBs saw low price match dealer estimate, with bid/cover ratio moderating to 4.34x from 5.43x at the previous auction. The space showed little to no reaction to the offering.
  • Better than expected CPI figures applied pressure to ACGBs as the data stepped up pressure on the RBA to raise interest rates. Headline CPI growth reached a two-decade high & core inflation breached the RBA's target range, which prompted participants to add hawkish cash rate bets ahead of next week's monetary policy meeting. YM last trades -7.5 & XM -0.5, both are testing session lows. Bills run -17 to +1 tick through the reds. The cash curve has bear flattened as yields sit 0.2bp-9.2bp higher.

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