Continued Flight To Safety Keeps Bonds Rallying

Little to add to the picture described in the earlier US TSYS bullet, as continued risk-off provide fuel for a rally in core bonds markets. Geopolitical frictions (mostly surrounding the Russo-Ukrainian stand-off) and the spectre of Fed tightening remain the main themes, with general weakness in equity markets also eyed.

• T-Notes are hitting new session highs as we type, they last change hands +0-18+ at 128-09. Eurodollar futures trade 1.5-8.0 ticks higher through the reds. Tsys have eased off in cash trade, with yields last seen 2.8-4.1bp lower, as belly outperforms. The yield on 2-Year Tsys has slipped below 1.0%, while 10-year yield has returned below 1.8%.
• JGB futures re-opened on a firmer footing and have extended gains from there. JBH2 last trades at 151.06, 22 ticks above previous settlement, after printing best levels in a week. Cash JGBs are subject to similar dynamics as they U.S. peers, with the belly outperforming as yields falter across the curve. The space has ignored the release of Japanese CPI figures, which marginally missed forecasts, pouring some more cold water on the prospect of BoJ debating policy normalisation. Participants look ahead to a liquidity enhancement auction covering JGBs with 5-15.5 years until maturity.
• Cash ACGBs have retreated across the curve, with yields last seen 4.8-8.5bp lower, as fresh selling impulse has overlapped with the impetus from the overnight move in U.S. Tsys. Aussie bond futures have been in demand, with YM & XM last +8.5 apiece. Bills trade unch. to +9 ticks through the reds. Nothing to rock the boat in the latest weekly issuance schedule and ACGB Apr '25 supply.