Core FI Catch Bid On Risk Aversion, ACGBs Rally On Coattails Of NZ Peers

After a broadly lacklustre start for core FI space outside of the Antipodeans, participants grew cautious as German Cll'r Merkel announced that Germany will go into a radical lockdown for five days over the Easter period. Merkel's comments helped T-Notes move away from their session low of 131-14 and the contract last sits +0-03+ at 131-21. Cash Tsy curve bull flattened, yields last seen 0.2-3.5bp lower. Eurodollar futures trade unch. to -0.5 tick through the reds. Snips from Fed Chair Powell's & U.S. Tsy Sec Yellen's upcoming testimony did the rounds, but provided little in the way of fresh insights. Fed's Bowman reiterated familiar lines from Powell's recent addresses, stressing that the Fed is "likely to continue supporting the economy for some time," as it is "still a long way" from meeting its employment & inflation goals.

• Slightly erratic price action in JGB futures saw the contract re-open at a session high of 151.38 after the Tokyo lunch break, before paring gains. JGB futures last trade at 151.27, -3 ticks vs. settlement. Cash JGB yields sit lower across a flatter curve, with 20s outperforming again. Japan's FinMin Aso noted that the gov't doesn't plan to raise taxes anytime soon, but remains committed to its goal of balancing the budget in FY2025. The MoF held an enhanced liquidity auction for off-the-run JGBs with 1-5 years until maturity.
• ACGB space found itself under the influence from across the Tasman, as NZGBs picked up a bid after NZ gov't announced a slew of measured designed to curb house prices. The broader risk-off impetus provided a fresh tailwind for ACGBs, helping them extend gains later in the session. YM +1.0 & XM +4.0 as we type, with 10-year futures printing session highs. Cash ACGB curve bull flattened, with yields sitting 0.2-3.9bp lower, albeit belly still outperforms on a lead from NZ, where 5s lead the way. Bills trade unch. to +2 ticks through the reds. The AOFM auctioned A$150mn of the 0.75% 21 Nov '27 linker.