Core FI Pressured By Reflation Trade Narrative, RBA Steps In To Defend 3-Year Yield Target

U.S. Tsys sold off in early dealing, in a move driven by the belly, ahead of this week's 2-, 5- & 7-Year Tsy auctions. Cash Tsy yields trade 0.4-3.7bp cheaper, with the 10-20 Year sector taking over from 7s as the weakest point of the curve. T-Notes have faded an earlier anaemic recovery attempt and currently trade -0-08 at 135-06+, hovering just above session lows. Eurodollar futures last seen +0.25 to -0.5 tick through the reds.

• JGB futures have ticked away from Friday lows and now change hands at 151.04, 15 ticks below last settlement. Cash JGB yields mostly trade marginally above neutral levels. Local services PPI printed at -0.5% Y/Y, indicating that deflation was a tad faster than forecast. The BoJ left all of its JGB purchase sizes unchanged during today's round of Rinban ops.
• U.S. Tsy weakness has spilled over into Aussie bonds, with cash ACGB yields trading 0.3-12.8bp higher across a steepened curve at typing. YM sits -5.0 & XM -12.5 (testing session lows). The RBA's attempt to enforce its 3-Year Yield target by offering to buy A$1.0bn of ACGB Apr '24 brought only a brief respite, as the size of purchases was seemingly deemed to be relatively light. Bills trade 1-12 ticks lower through the reds.