Core FI Better Bid Overnight, Ranges Tight

The lack of positive developments surrounding Brexit and the fiscal situation in DC provided some support for core FI markets during Asia-Pac trade. This promoted some light bull flattening in the U.S. Tsy space, although overnight trade has been relatively rangebound with the space moving back from richest levels, leaving yields across the curve within 1.0bp of their respective Wednesday closes. T-Notes last print +0-03 at 137-23, sticking to a 0-02+ range.

• Local news flow in Japan remains light, but the longer end of the cash curve continues to benefit from the recently outlined fiscal dynamic, although firm JGB issuance details surrounding the package are still lacking. There was little in the way of observable concession ahead of this afternoon's 20-Year JGB supply, perhaps aided by the U.S. fiscal and Brexit dynamics. This allowed futures to unwind their overnight losses and more, hitting the lunchbreak 4 ticks above yesterday's settlement levels. JGB futures then ticked lower after the lack of concession resulted in a sloppy 20-Year auction, which saw the low price come in below broader dealer expectations of 100.55 (as proxied by the BBG dealer poll), while the cover ratio slid to the lowest level seen at a 20-Year auction since '15 and the tail widened vs. prev. auction. Futures last unch. on the day.
• Aussie bonds traded better bid on the tweaked round of RBA 3-Year yield target enforcement flagged earlier, which saw the Bank offer to buy both ACGB Apr '23 & ACGB Apr '24, as opposed to the recent norm of just ACGB Apr' 24, with YM +1.2 and XM +3.4, sitting within touching distance of best levels of the day.