Core FI Generally Bid In Asia

U.S. Tsys showed little in the way of reaction to the Chinese data dump, with the quarterly GDP and monthly economic activity readings generally in line to a touch firmer vs. broader exp. T-Notes struggled to extend through the July 12 high overnight (133-20+), with the contract topping out at 133-21, last printing +0-05 on the day at 133-19+. The cash Tsy curve has seen some modest bull flattening, extending the move seen on Wednesday, with 2s little changed on the day, while the longer end of the cash Tsy curve runs as much as ~2.0bp richer. Weekly jobless claims and some of the regional Fed activity indices are due to be released during NY hours. Elsewhere, Fed Chair Powell will testify on the Hill for a second day, while Chicago Fed President Evans ('21 voter) will speak on the economy.

• JGB futures managed to add to their overnight gains at the Tokyo reopen, before pulling back to last print +4. Cash JGB trade has seen some outperformance for the 20- to 40-Year zone of the curve, which has richened by ~1.5-2.0bp given the overnight dynamic in U.S. Tsys, while the remaining benchmarks have richened by ~0.5bp. 10-Year JGB yields registered a new multi-month low of 0.01%. Broader headline flow has been a little light, with the latest liquidity enhancement auction covering off-the-run 1- to 5-Year JGBs having no real impact on the broader market. The latest BoJ decision headlines the local docket on Friday.
• Aussie bonds showed little in the way of net movement in the wake of the better than expected local labour market report (headline jobs and unemployment were better than exp., although underutilisation & underemployment ticked away from multi-year lows on the back of the lockdown in Victoria), with YM +3.0 & XM +5.5 at typing after a blip lower on the data. A reminder that the RBA's most recent SoMP did not look for a drop to 5.0% unemployment until Q421. Still, it will be wage growth and realised inflation that drives the medium-term evolution of the RBA's cash rate (at least based on Bank's current guidance), and the unemployment rate may not travel on a constant one-way trajectory given the local COVID situation. The release of the AOFM's weekly issuance schedule and A$700mn of ACGB 0.25% 21 November 2025 supply headline locally on Friday.