Aussie Yield Curve Bear Steepens On Federal Budget, T-Notes Edge Lower In Quiet Asia-Pac Trade

Australian yield curve bear steepened, digesting overnight impetus from U.S. Tsys & the 2021/22 Federal Budget delivered by Treasurer Frydenberg yesterday evening. The government made bold spending promises and forecast a wider than expected budget deficit of A$106.6bn., noting that 2021/22 debt issuance would total A$130bn (that is slightly more than expected) and revising issuance plan for the remainder of this year to A$210bn (of which $198 billion has been completed). That said, cash ACGB yields trade off steeps, last 0.5-5.9bp higher across the curve, with 10s underperforming. YM sits -1.0, with XM -6.0 as we type; futures contracts have been rangebound. Bills last seen unch. to -1 tick through the reds. Worth noting that the RBA offered to buy A$1.0bn of semis today, while across the Tasman, NZGBs took a hit on the back of weak pricing seen at the latest round of RBNZ LSAP ops.

• T-Notes were biased lower but Tuesday's low of 132-12+ provided firm support. The contract last sits -0-01+ at 132-13, as e-minis slipped in a fairly quiet Asia-Pac session. The escalation of violence in Gaza may have weighed on risk appetite amid the absence of other catalysts, as IDF & Hamas continued to trade fire. Cash Tsy yields are broadly higher, albeit very marginally. Eurodollar futures last trade +0.5 to -0.5 tick through the reds. April CPI report, 10-Year auction & Fedspeak take focus in the U.S. today.
• JGBs saw little in the way of domestic drivers. Futures eased off ahead of the lunch break and last trade at 151.34, 13 ticks below Tuesday's settlement. Cash JGB yields were marginally mixed, with 4s underperforming. Focus in Japan moves to Thursday's 30-Year debt supply.