ACGBs See Another Day Of Fierce Swings

Tsys saw no tangible impact on the space as China released initial guidance on a 3-/5-/10-/30-Year multi tranche round of US$ supply, with such intentions already outlined yesterday. It looks like regional Asia-Pac investors stepped in to buy the latest leg lower, which, when coupled with spill over from ACGB price action, supported the space in overnight dealing. TYZ1 +0-02+ at 130-27, a touch off best levels, while cash Tsy trade has seen richening of ~2.5bp across the curve on the day. Tuesday's NY docket will be headlined by housing starts & building permits data, with a raft of Fedspeak also due.

• JGBs benefitted from the broader uptick in core fixed income markets, with futures last +7. Meanwhile, cash JGB trade sees super long paper richen by ~1.5bp with the curve bull flattening. The recent uptick in yields resulted in a slight narrowing of the tail at the latest round of 20-Year JGB supply, albeit by the most incremental of margins, while the low price met broader dealer expectations (as proxied by the BBG dealer poll). Ultimately demand wasn't strong, with worries surrounding the broader international fixed income environment (inflationary fear & central bank rate setting questions in some core markets) and the burden of increased JGB supply at some point in the coming months pushing the cover ratio to the lowest witnessed at a 20-Year auction since '15. 20s lagged the bid in surrounding paper as a result.
• Another busy session for Aussie bonds saw futures trade lower at the re-open, before a rally surrounding speculation that the RBA may need to step in to reinforce its yield targeting scheme in the coming days and a steady message in the RBA's October meeting minutes (reinforced by more detail surrounding gradual inflationary pressures). The space has since faded from best levels. That leaves YM & XM 0.5 tick above their respective settlements, with the swings in futures from bear flattening to bull steepening now fully unwound. Cash ACGB trade has seen some twist flattening of the curve.