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Bull Steepening, Aided By Dovish RBA Surprise

US TSYS

TYZ2 deals +0-10 at 113-16+, 0-03 off the recently printed session high. The contract has operated in a 0-12+ range, on above average volume of ~179K, even with Hong Kong & China observing holidays.

  • Early Asia-Pac trade saw Tsys rally on the latest North Korean missile launch, which flew over Japanese airspace. Although the lack of damage to Japanese assets and fact that the missile landed outside of Japan’s EEZ, in the Pacific Ocean, allowed the space to retrace the related bid. The retrace was further aided by a block sale in FV futures (-5.7K).
  • A fresh bid came back in later in the session on the back of a dovish surprise from the RBA, as the Bank delivered a 25bp hike vs. the widely expected and largely priced 50bp step.
  • This saw all of the major Tsy benchmarks register fresh session lows in yield terms, with the front end continuing to outperform, as it has all session (albeit as the curve flipped between bullish and twist steepening on a couple of occasions). A couple of block sales in TU futures (-1.4K & -1.3K) may have limited the post-RBA uptick.
  • Looking ahead, Tuesday’s NY docket will be headlined by final durable goods readings, JOLTS job opening data and Fedspeak from Jefferson, Williams, Mester, Logan & Daly
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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