Cheaper, Poor 5Y US Tsys Auction, BoC Shifts To A Neutral Bias

ACGBs (YM -4.0 & XM -6.0) are cheaper after risk appetite improved following the surprise easing of policy announcement from the PBOC. The improvement in market sentiment was also supported by better-than-expected global PMI data and the BoC's removal of its tightening bias. US tsys finished the NY session 4-5bps cheaper across benchmarks ahead of Thursday's busy US calendar: GDP, PCE, Weekly Jobless Claims and Tsy Sec Yellen’s Outlook.

• US tsys were also pressured by an ugly $61bn 5-year auction (4.055% high yield vs. 4.035% WI; 2.31x bid-to-cover vs. 2.50x in the prior month) and a heavy corporate supply calendar.
• The Governor of the PBoC said it will cut the reserve requirement ratio for all banks by 50bps to 7.0%, the first cut since September. Iron ore rallied.
• The BoC held its policy rate steady at 5% and moved from a tightening to a neutral bias.
• Cash ACGBs are 4-6bps cheaper, with the AU-US 10-year yield differential unchanged at +11bps.
• Swap rates are 4-6bps higher, with the 3s10s curve steeper.
• The bills strip bear-steepens, with pricing -1 to -4.
• RBA-dated OIS pricing is flat to 4bps firmer, with December leading. A cumulative 37bps of easing is priced by year-end.
• Today, the local calendar is empty.