Asia Happy To Buy The Dip In Tsys, Again

Wednesday's Asia-Pac session was light on news, but that didn't stop regional investors from dipping their toes into long U.S. Tsy positions on the back of Tuesday's dip.

• Desks cited solid demand from real money a/cs in the 10-Year zone as the curve saw some light bull flattening (cash Tsys trade up to 1.0bp richer at typing), with T-Notes +0-05+ at 137-19+ at typing, holding to a 0-05+ range on volume of ~110K. Eurodollar futures are unchanged to +1.5K through the reds, with the highlight on the flow side coming in the form of an EDU2/U4 steepener (which saw 5.5K lots trade in 1 clip) although outright and spread flow was generally mixed in nature.
• It was a narrow session for JGB futures, with the contract operating a touch off the overnight lows, -13 last. Cash JGBs were cheaper across the curve but generally traded within 1.0bp of settlement levels. Today's BoJ Rinban operations saw the Bank leaves the size of its 1-5 Year JGB purchases unchanged, with little in the way of notable movement in the offer/cover ratios. Elsewhere, we heard from BoJ's Amamiya, but he didn't add to the policy debate as he went over old ground.
• Aussie bonds are steeper on the day, YM -1.5, with XM -7.0 and have given back their early outperformance vs. Tsys (at least as observed by the AU/U.S. 10-Year yield spread). The Australian GDP reading was stronger than median expectations. Elsewhere, RBA Governor Lowe & Deputy Governor Debelle are making an appearance in front of the Economic Standing Committee in Canberra, which has generated little in the way of surprise with debate. The impact of flows vs. stock of QE, relative bond yield dynamics, direction of the AUD (with AUD TWI at the fore), focus on unemployment as opposed to the risk of excessive borrowing levels, housing prices, infrastructure investment and the Bank's economic outlook dominate the lines of questioning. It is worth noting that Lowe pointed to an open mind re: the potential extension of QE beyond the already outlined A$100bn level, with that particular thought process to focus on economic performance, relative central bank stances and the functioning of markets. The latest ACGB '31 offering saw a soft cover ratio, at least by recent standards, perhaps the recent cheapening scared off a chunk of the potential bidders even against the upcoming Christmas break for AOFM issuance. Still, average yields managed to stop ~0.6bp through prevailing mids at the time of auction (per BBG pricing).