Core FI Crumble Under Pressure Of Hawkish Fed, BoJ Stays On Sidelines

Asia-Pacific reaction to Tuesday's hawkish Fedspeak resulted in continued selling pressure on core FI, with participants assessing remarks from FOMC's Brainard, who called for rapid balance-sheet reduction to start as soon as next month, a view later echoed by her Fed colleague Mary Daly. A bleak Caixin Services PMI reading failed to provide any support to the space, with markets in China, Hong Kong and Taiwan open again after a holiday-elongated weekend.

• T-Notes extended their rout to a fresh cycle low of 120-11. TYM2 still hovers just above there, last -0-16 at 120-13. Eurodollar futures run 1.5-11.0 ticks lower through the reds. Cash Tsy yields sit 5.1-7.0bp higher across the curve, with benchmark 10-Year yield running as high as to 2.616% at its peak. The minutes from the FOMC's March monetary policy meeting headline the local docket on Wednesday, with Fed's Harker due to discuss the economic outlook.
• It seemed like BoJ inaction vs. upward pressure on yields exacerbated JGB weakness, with futures posting a downtick after the Bank stayed on the sidelines despite earlier speculation re: potential for unscheduled bond purchases. JBM2 changes hands at 149.34, 42 ticks below last settlement and 2 ticks above session low. JGB yields pressed higher in cash Tokyo trade, with bear steepening evident amid particular weakness in the super-long end. The 10-Year yield targeted by the BoJ sits at 0.230%, not too far from the official cap of 0.250%.
• 10-Year ACGB yield surged to multi-year highs as Aussie bonds sold-off, extending the prior day's drop caused by a hawkish tilt in the RBA's rhetoric on interest rates outlook. Cash ACGB yields trade 8.2-12.7bp higher across the curve. Futures also slipped, with YM last -9.0 & XM -10.0. Bills run 6-18 ticks lower through the reds. The space paid little attention to an auction for ACGB May '30 as focus turns to a parliamentary testimony from RBA's Bullock & Kent.