ACGBs Apply Light Pressure Overnight, Oil Gives Some Counter

ACGB price action applied some pressure to U.S. Tsys in Asia hours, although sharply lower crude oil prices provided some cushion, leaving TYZ1 -0-09 at 130-28+. Cash Tsys run unchanged to ~3.0bp cheaper across the curve, with bear flattening in play. The short end dominated on the flow side, with relatively sizeable EDZ3 upside exposure sought via screen trades (2EZ1 98.75/99.00 call spread lifted vs. 2EZ1 98.00 puts and outright 2EZ1 98.625 call lifts).

• Aggressive twist flattening of the curve was witnessed on Wednesday, with more than a sprinkling of global spill over influencing the front end in the wake of much firmer than expected underlying Australian CPI data and the latest BoC monetary policy decision. Meanwhile, the long end drew support from the UK DMO's choice to implement a larger than expected cut to Gilt issuance during the remainder of the current FY. The latest round of 5-Year Tsy supply stopped through WI by 2.5bp, with the cover ratio ticking higher, moving above its recent averages, while the dealer takedown was one of the lower instances on record. The auction helped the 5-/30-Year yield spread off of the flattest level witnessed since Mar '20. 2s and 3s were cheaper on the day (2-Year yields rose ~3.5bp on the day), while 30s led the long end richening, as yields there fell by ~9bp on the day. NY flow of note included a TU/FV steepener (+15,795/-7,580) in the early afternoon, while an FV/WN flattener was seen towards the close (-5,340/+2,000). A block seller of UXY (-5,358) was also seen during the NY afternoon.
• 7-Year Tsy supply, Q3 GDP and weekly jobless claims data are all due during NY dealing.