Core FI Biased Lower In Asia

The U.S. Tsy space has cheapened a little overnight, TYU1 last deals -0-03 at 131-22, with cash Tsys bear steepening a little, as 30s cheapen by just over 1.0bp. There hasn't been much in the way of regional willingness to push back against Thursday's cheapening during Asia dealing, with the proximity to the elongated Memorial Day weekend and today's U.S. PCE reading perhaps keeping some sidelined, even with estimates pointing to an above average round of month-end extensions for the space.

• JGB futures print -15 vs. yesterday's settlement, with the belly of the curve leading the way lower in cash trade. There has been little in the way of meaningful news flow, with onshore investors playing catch up to overnight movements in the broader core global FI space. Local data was broadly in line with expectations, with nothing in the way of notable movement in the latest round of Tokyo CPI & labour market data. A quick look at the latest round of BoJ Rinban operations, which saw purchase sizes remain unchanged across the buckets in play, with steady to lower offer to cover ratios across the 3- to 5- and 5- to 10-Year buckets. Elsewhere, corporate supply saw SoftBank price Y100bn of paper across 5-, 7- & 10-Year tranches.
• The Aussie bond space continues to hold weaker on the day, with 3-Year EFPs pushing out levels not witnessed since the Mar '20 vol. YM -2.5, XM -7.0. While there has been little in the way of overt headline triggers, it is worth flagging the widening in the ACGB Apr '24/Nov '24 yield spread, which has now unwound 2/3rds of the recent 6-7bp of tightening over just 2 sessions, as markets swing back to pricing a lower chance of the RBA extending its yield targeting mechanism out to cover ACGB Nov '24 in July. There has also been some focus on local mortgage rate dynamics, after local press flagged that NAB cut two of its variable investment home loans by 30bp this morning. The pricing side of the latest round of ACGB Apr '27 supply was firm enough, with the weighted average yield printing 0.94bp through prevailing mids at the time of supply (per Yieldbroker pricing), although the cover ratio wasn't anywhere near as firm, printing just above 2.00x. Participants were perhaps a little wary in the wake of the recent richening and may have one eye on the RBA's July's decision, which may have kept overall bidding subdued (also resulting in a slightly wider high to average yield differential this time out). Finally, the AOFM released its weekly issuance slate, which is a little light on duration.