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PORTUGAL AUCTION PREVIEW

Exchange Operation Announced

US TSY OPTIONS

10Y Put Sale

GBP

Some reversal in the Pound

GILT PAOF RESULTS

PAOF of the 0.375% Oct-26 Gilt not taken up

US EURODLR OPTIONS

Overnight Trade Recap

CHINA

Tech Equities Find Resistance At 100DMA

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{US}{JN}{AU} BONDS: Cross Currents In Asia, Lowe Plays Down Market Pricing Re: Rate Hikes

A fresh multi-decade high for the Nikkei 225 helped apply modest pressure to U.S. Tsys during early Asia-Pac dealing, with some feedthrough from the Aussie bond space also evident. A couple of pockets of TY screen selling added to the downward pressure, although the contract stuck to a 0-05 range, recovering from worst levels as ACGBs turned bid to last trade -0-03 at 133-06+. Meanwhile, cash Tsys trade little changed to ~1.0bp richer on the day, with 5s outperforming. The latest round of U.S. CPI data dominates the NY docket on Tuesday.

  • The uptick in the Nikkei 225 applied some light pressure to JGB futures, with the contract last 6 ticks below yesterday's settlement levels. Cash JGB trade sees the major benchmarks trading either side of unchanged out to 20s, within -/+0.5bp boundaries of yesterday's closing levels after initially benefitting from the overnight richening in U.S. Tsys. 30s & 40s print ~0.5bp cheaper on the day. The space seemed to look through a well-received 5- to 15.5-Year liquidity enhancement auction covering off-the run JGBs.
  • RBA Governor Lowe's explicit push back against market pricing of rate hikes in '22 & '23 has promoted some outperformance in the front end of the ACGB curve, with YM +3.6 and XM +0.9 at typing (quoting the Dec '21 contracts). The comments also allowed the IR strip to flatten. Elsewhere, Lowe pointed to the potential for a cessation of bond purchases in '22. He also outlined the reasoning behind moving ahead with tapering at the Bank's September decision, in addition to adjusting the meeting where the RBA will reconsider its bond purchase rate to Feb '22. The thoughts were largely in line with the broader groupthink expressed in the wake of the decision i.e. gives the time bank to assess the economic impact of re-opening, addresses any COVID-related delay of reaching RBA goals and provides some insurance against downside risks. The uptick in the Nikkei 225 and syndication of a new 30-Year NZGB across the Tasman had applied some pressure to the space earlier in the day.