Core FI Lower Overnight

The modest weakness across the bulk of the JGB curve may have applied some pressure to U.S. Tsys during Asia-Pac hours. T-Notes last print -0-04+ at 133-21, with cash Tsys running 0.5-2.5bp cheaper across the curve, bear steepening in play. Most of the macro headline flow has been centred on Sino-U.S. tensions, while sell-side calls & market pricing re: the RBNZ hiking cycle are becoming more aggressive in the wake of the firmer than expected NZ CPI print for Q2. Flow was dominated by a 5.0K lift of the TYQ1 134.25/135.00 1x2 call spread via block. Retail sales data and the latest UoM sentiment survey will headline the local docket during NY hours. We also note that NY Fed President Williams will speak, but the topic is "culture in the workplace" which limits the scope for market impact.

• JGB futures have extended their drift lower during the early part of the Tokyo afternoon, with the contract now -13 on the day, with little movement in the cash JGB space in the afternoon. The 5- to 20-Year zone of the curve has cheapened by 0.5-1.5bp, with the wings seeing some modest richening. The BoJ offered little in the way of notable surprises in its latest decision, leaving its broader monetary policy settings unchanged and unveiling its green strategy (there will be more on this matter in our full review).
• Aussie bond futures nudged a touch lower in the wake of the blowout Q2 CPI print from across the Tasman, with YM -1.5 and XM at unchanged levels at typing. We have flagged some of the potential hurdles for a break higher in XM i.e. technical resistance and the addition of longs yesterday, although we do reiterate that the post-NZ data dip has been shallow, with the RBNZ-RBA tightening divergence now well-defined. The AU/NZ 2-Year swap spread has moved to fresh cycle lows in the wake of the data release. Elsewhere, a firm round of ACGB Nov '25 supply was seen, likely driven by the supportive matters we identified pre-auction (levels of liquidity in the system, relative international appeal & RBA-adjusted net supply), with the outright richness (at least from a short-term perspective) discounted. The weighted average yield printed 0.97bp through prevailing mids (per Yieldbroker). The reduced auction size (A$700mn) provided artificial support for the cover ratio (would have been around 4.6x if auction size was consistent with the previous auction, all else equal).