Firmer Overnight

The bid in wider core fixed income markets dragged futures higher in overnight trade, with general recession and China COVID worry remaining evident, although the move faded from extremes late in the NY day as equities caught a bid. That leaves YM +11.5 & XM +8.5 in early Sydney dealing.

• YM & XM sit ~40 & ~30bp from their respective cycle troughs, aided by RBA rate hike premium retreating from extremes in recent sessions. Note that there hasn’t been much in the way of obvious short cover in YM to trigger the move from cheaps, with open interest little changed vs. levels observed at the time where the contract printed its current cycle low. There has been a modest down tick in XM open interest (2%) in recent days, although this isn’t particularly large in the grander scheme of things.
• The IR strip runs 1-10 ticks firmer through the reds, bull flattening, with the contracts a touch shy of overnight best levels.
• A$1.0bn of ACGB May-32 supply, the release of the weekly AOFM issuance slate and panel participation by RBA Deputy Governor Bullock at the Regulators 2022 (FINSIA) headline the local docket on Friday.