Cheapening From Best Levels, AU/U.S. 10-Year Spread Eyed

Core fixed income markets have edged away from their Monday/early Asia bullish extremes, with the Asia-Pac region seemingly keen to fade Monday’s NY richening in U.S. Tsys (which was partly linked to month-end extension-related flow). Firmer than expected PMI data out of China (with both of the manufacturing PMI prints unexpectedly registering expansionary readings) will be helping keep the pressure on. That leaves YM at unchanged levels, while XM is down 4.0, with both just above their respective Sydney lows.

• Note that local data saw a narrower than expected Q4 BoP surplus print, although exports are set to provide less of a drag on Q4 GDP readings than was prev. exp. Elsewhere, housing finance data saw the headline lending metric grow at a faster rate than expected, driven by investment lending.
• The AU/U.S. 10-Year yield spread now prints around 32bp. We are in the area where we have seen cross-market demand for Aussie 10s in recent history, although heightened market volatility and uncertainty re: the Russia-Ukraine situation may limit demand for AU/U.S. narrowers at this time.