Core FI Supported By NASDAQ Weakness, JGB Futures Lag

Earnings-driven weakness for NASDAQ 100 e-minis provided some modest support for U.S. Tsys overnight, although there has been a move away from session extremes. TYH2 last +0-01 at 128-05, trading a touch shy of the peak of a 0-06+ range. Meanwhile, cash Tsys run 0.5-1.5bp richer across the curve, with very modest bull steepening in play. Thursday’s busy NY docket includes the ISM services survey, factory & durable goods data, weekly jobless claims, unit labour costs and challenger job cuts. We will also get the testimonies of Fed Governor nominees Raskin, Cook & Jefferson (the pre-released initial comments from the 3 didn’t reveal any major talking points, with a focus on inflation front & centre). Further afield, monetary policy decisions from the ECB & BoE will provide interest during early NY hours.

• JGB futures underperformed within the broader core FI space for most of the session, but manged to finish +1, while cash JGBs run little changed to 1.5bp richer across the curve, with some modest twist flattening in play. There was a lack of headline catalysts to facilitate the aforementioned underperformance in futures. Meanwhile, the super-long end drew support from a smooth round of 30-Year JGB supply (low price topped wider exp. while cover ratio dipped vs. prev. auction, but remained above the 6-auction average). Elsewhere, BoJ Deputy Governor Wakatabe was the latest BoJ board member to overtly push back against tightening/YCC tweak speculation.
• Aussie bonds drew support from the NASDAQ driven risk aversion, with YM +2.5 & XM +4.5, as the cash ACGB curve bull flattened. Local data had no tangible impact on the space. Bills finished unch. to +4 through the reds.