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Core FI Off Worst Levels, But Post-Powell Pressure Dominates In Asia

BONDS

The early selling impetus witnessed in Asia, based on regional reaction to Fed Chair Powell’s hawkish round of Tuesday rhetoric and soothing tones from the Chinese policymaking sphere when it comes to economic growth in ’21, has faded a little, although TYH2 is still -0-08 on the day, printing 130-18 (0-07 off session lows). Cash Tsy trade sees the major benchmarks print 2.0-2.5bp cheaper across the curve, with the belly leading the weakness, as you would expect in the wake of Powell tipping his hat to the potential for a swifter tapering process. A 2.5K block sale of TY futures headlined on the flow side during Asia-Pac hours. Eurodollar futures are flat to 7.0bp cheaper through the reds, but operate off lows, tracking Tsys. The latest ADP employment print and ISM m’fing survey reading will cross during the NY session.

  • JGB futures were 6 ticks lower at the close, following the broader impulse of core global FI markets. Meanwhile, the major cash JGB benchmarks ran flat to 1bp cheaper across the curve, with 10s leading the weakness. Japanese Q3 capex data was a touch softer than expected, but that had no notable impact on the market. Elsewhere, BoJ board member Adachi flagged personal opinion re: economic benefits of a weaker JPY, in the context of the recent moves in the currency, while noting that the central bank does not target specific FX levels. Adachi also suggested that the BoJ would only conduct deeper monetary easing if it needed to address tail risks.
  • Aussie bond futures failed to push lower in the wake of Q3 GDP data, which wasn’t as bad as broader exp., and ground away from lows thereafter. That left YM -6.0 and XM -4.0 come the bell. There was little else of note in the local space on Wednesday, outside of a A$1.0bn round of ACGB Apr-33 supply, which passed smoothly, but wasn’t as firm as we have become accustomed to in recent times (in line with the recent trend when it comes the granular demand metrics witnessed at ACGB auctions).
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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