Core FI Fails To Find A Spark On Friday

U.S. Tsy dealing was limited in Asia-Pac hours, with T-Notes operating in a 0-03 range, last 0-00+ at 134-11, while cash Tsys are little changed to ~1.0bp richer across the curve. Regulatory matters in China continue to provide the highlights on the headline front, and perhaps provided very modest support to the space. A ~30K lift of EDZ1/H2 was seen in Asia hours after heavy selling in the front end of the outright strip on Thursday.

• Another sedate Tokyo session for JGBs, with some peripheral headlines surrounding the local COVID situation, but nothing in the way of market-meaningful input. Futures +6, with the major cash JGB benchmarks little changed to 1.0bp richer out to 20s (5s outperform), while 30s and 40s are marginally cheaper on the day (longer dated swap spreads are a touch tighter as a result of the cheapening in JGBs). The monthly JSDA data pointed to trust banks buying a record net amount of super-long JGBs in July, while foreign investors lodged a record round of net buying of 10-Year JGBs in the same month.

News that Sydney's lockdown has been extended through the end of September, with tighter restrictions imposed (including a curfew, compulsory mask wearing and limited exercise across some areas of the city) has had little impact on the space. YM +1.0, XM +0.5 after an early uptick faded. The latest round of ACGB Apr '25 supply saw a very strong cover of over 8.0x (note the DV01 & notional amount on offer was very limited), although the pricing wasn't particularly aggressive through prevailing mids (0.26bp) given the recent richening which has resulted in multi-month lows in yield terms. The space has been happy to look through the uptick in ACGB issuance size scheduled for next week, although the $2.0bn of ACGBs on offer during the week isn't anything like the regular amounts we saw tendered in the recent past (it will of course be supplemented by the previously outlined round of indexed bond issuance via syndication).