Bear Steepening Evident As Risk Aversion Dissipates

Recent risk aversion eased, pulling the rug safe haven assets. T-Notes posted a leg lower as the DXY had a brief look above its 200-DMA for the first time since May 2020. The contract last changes hands -0-02+ at 132-00+ after bottoming out at 131-30. Cash Tsy curve has bear steepened, but 7s narrowly outperform ahead of today's much awaited supply of that maturity. The U.S. Tsy will offer $62bn of 7-Year Notes today and it comes after a very weak previous offering of these notes. Eurodollar futures trade unch. to -1.0 tick through the reds. Today's U.S. data docket features GDP/PCE and initial jobless claims, while the Fed speaker slate includes Williams, Clarida, Bostic, Evans & Daly.

• JGB futures softened immediately after the re-open, but have stabilised since and last trade at 151.32, -10 ticks vs. settlement. Cash JGB yields sit higher across a steepened curve. Although the longer end generally underperforms, 40s are slightly less weak , with the MoF set to auction Y500bn of 40-Year JGBs today. On the news front, Japanese PM Suga confirmed that North Korea test launched two ballistic missiles, but they fell outside of Japan's EEZ.
• In Australia, YM trades -2.0 & XM -4.5. Cash ACGB curve has bear steepened, yields last sit unch. to +4.9bp. Bills trade unch. to -2 tick through the reds. The RBA offered to buy A$2.0bn worth of ACGBs with maturities of Nov '28 - Nov '31.