Aussie Bonds Track U.S. Tsys Lower, JGBs Creep Higher

All eyes are on China after the PBOC slashed the interest rates applied to their 1-year MLF operations and 7-day reverse repo operations by 10bp apiece. At the top of the hour, Asia's largest economy will report quarterly growth figures alongside monthly activity indicators.

• T-Notes extended their sharp sell-off seen in Friday's NY hours, before bottoming out at 127-23+. TYH2 continues to trade in close proximity to its worst levels of the session, last -0-14 at 127-24. Eurodollar futures last seen unch. to 4.5 ticks lower through the reds. Cash Tsys are closed owing to a public holiday in the U.S.
• JGB futures have caught a bid, albeit they still hold the previous day's range, with speculation rife ahead of tomorrow's BoJ monetary policy meeting. The contract operates at 150.85, 5 ticks above Friday's settlement, withstanding impetus from U.S. Tsys. Cash JGB curve has twist steepened a tad. The BoJ's Rinban ops covering 1-10 & 25+ Year JGBs came and went, leaving Tuesday's policy announcement in the centre of attention (see the latest MNI INSIGHT piece for more colour on the Bank's internal debates). Geopolitical matters may have lent some further support to JGBs, as North Korea conducted another missile test, its fourth this month. Elsewhere, PM Kishida is set to launch the regular parliamentary session with a customary policy speech today.
• Cash ACGB curve has bear steepened, yields last seen 5.0-7.5bp higher. Aussie bond futures have faltered, likely responding to the weakness in U.S. Tsys, with YM last -7.0 & XM -8.5. Bills trade 1-10 ticks lower through the reds. The aforementioned rate cuts out of China may have amplified pressure to the space, albeit price action seems primarily driven by Aussie bonds catching up with the moves in U.S. Tsys after Sydney hours Friday.