Desks Point To Japanese Demand For U.S. Tsys

TYZ1 moved higher in Asia, last +0-10 at 130-03, with the spill over from the latest RBNZ monetary policy decision supporting, while desks flagged demand out of Japan as participants reacted to the recent Tsy cheapening as Tokyo returned from Tuesday's holiday. Cash Tsys run 2.5-4.0bp richer across the curve as a result, with bull flattening in play. A 5K block sale of TYZ1 129.50 putts headlined on the flow side, while screen interest in upside EDZ4 exposure via 3EZ1 98.375/98.625 & 3EZ1 98.50/99.00 call spread buying was observed. Futures roll activity supported broader volume. NY hours will see the release of the minutes from the FOMC's most recent monetary policy decision, the PCE suite, weekly jobless claims data, the second GDP estimate for Q3, durable goods data and new home sales, as well as the final UoM sentiment reading for Nov.

• Tokyo morning trade initially saw a modest extension lower for JGB futures as local participants caught up to broader market developments as they returned from holiday, although the contract recovered from session lows as a bid crept into the U.S. Tsy space and domestic equity markets sold off. That left the contract -11 at the bell, while cash JGB trade sees the major benchmarks sit flat to 1bp cheaper across the curve. The offer/cover ratios from today's BoJ Rinban operations were as follows: 1- to 3-Year: 3.02x (prev. 3.02x), 3- to 5-Year: 1.67x (prev. 2.80x), 5- to 10-Year: 1.87x (prev. 1.84x). Local headline flow was light, outside of Japanese Finance Minister Yamagiwa pointing to a focus on all market pertinent matters when it comes to the recent movements in the JPY and confirmation that the country will be participating in the coordinated oil stockpile release from some of the major oil consuming nations.
• Aussie bonds looked through local data, with the bid in Tsys and post-RBNZ fallout in NZ bonds driving matters. The space richened even as the RBNZ delivered the widely 25bp expected OCR hike as markets had priced a ~34% chance of a 50bp hike ahead of the decision. That left YM +2.5 and XM +1.0 at the bell, more than reversing overnight/early Sydney losses, while the IR strip was flat to +7 through the reds.