ACGBs In The Driving Seat Again On RBA Inaction

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). 7-Year Tsy supply, Q3 GDP and weekly jobless claims data are all due during NY dealing.

• JGB futures looked to the ebbs and flow elsewhere, initially extending the overnight rally before pulling back as core FI came under pressure, last +12. Cash JGB trade saw yields run little changed to ~1.0-2.0bp lower on the day, with outperformance for 7s on the overnight bid in futures, while 40s benefitted from the NY flattening in U.S. Tsys. To summarise, there were no surprises when it came to the latest BoJ monetary policy decision, with monetary policy settings unchanged and the now standard dovish dissent from Kataoka present. CPI projections for the current FY were marked lower, with the same holding true for the Bank's GDP projection (the next FY is expected to see a slightly faster clip of GDP growth as a result). The language deployed surrounding the economy was very matter of fact, once again providing no surprises.
• ACGBs were subjected to a fresh round of pressure as the RBA failed to step in to buy ACGB Apr-24, with the yield on that line now topping 0.50% as a result (the RBA has a 0.10% target for the yield on that specific bond). This triggered plenty of conversation re: the future of YCT ahead of next week's RBA meeting. YM's overnight weakness extended as a result, -24.5 last, with XM dragged lower on the move, to last trade -6.5, as the curve was subjected to further flattening pressure. The cash 3-/10-Year ACGB yield curve now sits at levels not seen since November '20. Elsewhere, RBA Deputy Governor Debelle pointed to a want for a little, not a lot, more inflation, in addition to stressing the Bank's desire for higher wage growth.