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Core FI In Retreat After U.S. Senators Buy Time With Debt-Ceiling Vote

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U.S. Senate passed a bill extending the federal government's borrowing authority through December 3. The move allows the nation to avert an unprecedented default but sets the scene for another round of difficult horse trading by the end of the year. The passage of the bill kept risk appetite buoyant, following Thursday's optimistic reaction to the news of a bipartisan deal on the matter. U.S. fiscal matters overshadowed regional developments in Asia, including the release of above-forecast Caixin Services PMI out of China, which has returned from a week-long holiday.

  • T-Notes extended Thursday's losses and descended onto a key layer of support provided by 131-07, where the contract bottomed out on Sep 28. The level proved resilient and T-Notes last trades -0-04+ at 131-08. Cash Tsy curve bear steepened, yields last sit 1.0-1.4bp higher. Eurodollars last trade 0.5-2.0 ticks lower through the reds. Monthly NFP report is set to steal the limelight later in the day.
  • JGB futures reopened on a softer footing and only slightly trimmed losses after the Tokyo lunch break. The contract trades at 151.36, 4 ticks shy of previous settlement. Cash JGB yields curve runs steeper as we type. Japan's household spending shrank faster than expected in August, but contraction in BoP current account surplus was smaller than forecast. The BoJ offered to buy 1-10 Year JGBs at the latest round of its Rinban ops. Participants await monthly Eco Watchers Survey and the first policy speech from PM Kishida.
  • Cash ACGB yields pushed higher across the curve, 3-Year yield reached its highest point since March 2020. Aussie bond futures retreated, YM & XM both sit -6.5. Bills operate 1-9 ticks lower through the reds. The ACGB space showed little reaction to the release of the RBA's Financial Stability Review. Developments on the supply front were also ignored, as the AOFM auctioned A$1.0bn of ACGB 21 Apr '27, drawing bid/cover ratio of 5.79x (prev. 3.93x).

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