Antipodean Headline Flow Dominates

TYH2 stuck to a narrow 0-05+ overnight, hampered by the closure of cash Tsy trade, owing to the observance of a Japanese holiday. The contract last deals -0-00+ at 126-14+, just off the base of the overnight range. Gyrations in the ACGB space provided some lead for Tsys, but a lack of meaningful macro headline flow made for a contained session. The space looked through the cancellation of Thursday’s Blinken-Lavrov meeting, while the White House took a Biden-Putin meeting off the table (until there is a de-escalation re: Ukraine). Fedspeak from Daly & 5-Year Tsy supply are due on Wednesday.

• Aussie bonds ran lower in early Sydney trade, with Western sanctions on Russia avoiding the worst-case scenario. The presence of 10-Year ACGB supply, RBA-related jitters ahead of WPI data and perhaps some pre-RBNZ trans-Tasman spill over provided further sources of downward impetus early on, with YM testing cycle lows. WPI data provided the most marginal of misses in Y/Y terms but was still in broadly line with RBA assumptions. This saw the space off of worst levels as some of the more aggressive market pricing re: RBA hiking moderated at the margin (although CBA are sticking with their June hike call). Still, hawkish trans-Tasman spill over capped the space, with the RBNZ delivering the widely expected 25bp hike, as it outlined its QT plans and signalled a higher path for interest rates over the forecast horizon (in which it envisages a move comfortably above its estimate of neutral levels). YM was -8.5, while XM was -7.0. EFPs narrowed by 1.0-1.5bp on the session.