Core FI Weak Overnight

The broader risk-positive move, aided by the realisation of and expectations re: further easing from within the Chinese policymaking sphere, in addition to some post-RBA spill over from the ACGB space, weighed on the U.S. Tsy space in Asia. TYH2 -0-03 at 130-18 as a result, with cash Tsys running 1.0-1.5bp cheaper across the curve, led by the belly. A 6K FV futures block sale (the second instance of such flow in as many Asia-Pac sessions) aided the momentum. 3-Year Tsy supply headlines the NY docket on Tuesday.

• Today’s 30-Year JGB auction provided a marginal miss vs. broader sell-side expectations, with the cover ratio edging lower when compared to the previous 30-Year auction, printing just below the 6-auction average. This means the auction was on the softer side of the scale but wasn’t dreadful by any stretch of the imagination. Futures printed a new session low in the wake of the supply, extending their morning weakness, before hitting the closing bell -21, just off session lows. 7s led the weakness observed across the cash JGB curve, cheapening by ~2bp, with more modest losses (up to 1bp) witnessed elsewhere on the curve.
• Aussie bonds extended lower in the wake of the latest RBA decision. The Bank played down worry re: the omicron COVID strain and rolled forward expectations for the Australian economy moving back to the pre-COVID growth path, while there was some rearranging when it came to the time-related references surrounding economic forecasts, which were moved away from the final guidance paragraph. This made for a modestly hawkish market reaction. That left YM -8.5 and XM -6.5 come the bell. Note that desks pointed to some receiving flow in 1-Year/1-Year forward swaps as a supportive for red Bill contracts ahead of the decision, in what seemed to be pre-decision positioning for a dovish outcome. This evaporated on the above developments. EFPs narrowed on the day.