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USD bid is the early story of the day


Finland 10y: Spread set


France 15y Green OATei: Spread set

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Core FI Firms A Little In Asia


U.S. Tsys garnered an early, modest bid in Asia-Pac trade, aided by Australia declaring a political boycott of the Beijing Winter Olympics & some cross-market spill over from strong ACGB supply. Still, firmer regional equities & e-minis tempered the bid (on hopes re: the severity of omicron and the Chinese policy easing dynamic). That leaves TYH2 +0-02+ at 130-13, off the peak of its 0-06+ overnight range. Cash Tsys run 0.5-1.5bp richer across the curve. 10-Year Tsy supply headlines the U.S. docket on Wednesday, with JOLTS job data also due.

  • JGB futures hit the bell +3. The contract showed lower at the re-open on the broader impulse witnessed in U.S. Tsys overnight (JGB futures once again experienced a relative degree of resilience in overnight trade), before edging away from worst levels. Cash JGBs were flat to 1.0bp richer when compared to yesterday’s closing levels, with 5s lagging ahead of tomorrow’s 5-Year JGB auction. Local news flow has been limited in the grander scheme of things, with comments from Cabinet Secretary Matsuno and BoJ Deputy Governor Amamiya pointing to continued caution re: the omicron COVID strain, with a lack of notable, fresh information evident re: their respective policy areas. BoJ Rinban operations saw the following offer/cover ratios: 1- to 3-Year: 3.60x (prev. 3.36x), 5- to 10-Year: 1.62x (prev. 2.80x).
  • Aussie bond futures moved away from their early Sydney lows through the day, aided by the aforementioned Australian diplomatic boycott of the Chinese winter Olympics and well-received ACGB supply. Today’s ACGB Nov-31 auction saw the weighted average yield price 0.85bp through prevailing mids (per Yieldbroker), while the cover ratio printed at a more than solid 4.48x. This was a firm auction by recent standards. The former was supported by well-known background matters (negative RBA-adjusted net supply, international relative value appeal and record levels of excess liquidity in the domestic banking system), while the latter was likely boosted by the fact that this is the final AOFM ACGB auction of calendar ’21. A quick reminder that this line showed up as borrowed via the RBA’s SLF earlier this week (~A$220mn), although this retreated back to A$0 as of Tuesday. A widening collateral shortage may have boosted demand. Elsewhere, the Christmas issuance hiatus will result in a deepening of the negative RBA purchase-adjusted dynamic (see auction preview bullet for more on that). This may have provided another source of demand at the auction. A spike higher in futures was observed later in the session (no headline flow apparent), with the contracts going out near late Sydney highs as the curve twist flattened, YM -0.5 & XM +2.5. Some bad execution in the IB strip skewed the optics re: RBA rate hike pricing (see earlier bullet for more on that), while the bid in bonds dragged the IR strip off lows. A reminder that STIRS & YM saw overnight/early Sydney pressure on the back of the previously flagged hawkish article from RBA watcher Terry McCrann.
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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