Initial Impetus Carries Core FI Higher And Peters Out

Core FI started the Asia-Pac session on a firmer footing as Asia-Pac participants woke up to a particularly strong 10-Year U.S. Tsy auction and the latest U.S. CPI report. Consumer-price growth slowed in July, pouring some cold water on prospects of sooner asset purchase tapering from the Fed. Continued regulatory crackdown by Chinese authorities, this time targeting insurance tech platforms, lent further support to core FI early on. T-Notes climbed to 133-24 in early trade, but trimmed gains as the initial impetus evaporated. The contract last trades +0-02 at 133-20+. Cash Tsy yields retraced their marginal dips and are virtually unchanged across the curve. Eurodollar futures run unch. to +1.5 tick through the reds. Factory-gate inflation, weekly jobless claims and a 30-Year auction take focus in the U.S. today.

• JGB futures attacked their overnight high of 152.17 in early Tokyo trade but then eased off alongside T-Notes and last trade at 152.14, 10 ticks shy of the previous settlement. Cash JGB yields sit a tad lower across the curve, with the super-long end outperforming. Japanese above-forecast PPI figures came and went, while the latest round of 1-10 Year Rinban operations saw no changes to purchase sizes.
• The RBA also held its bond purchase ops today and offered to buy A$2.0bn worth of ACGBs with maturities of Nov '28 to May '32 today. However, it was the local Covid-19 situation that stole the limelight, with ACT entering a snap seven-day lockdown after detecting the first positive case in more than a year. Cash ACGB curve bull flattened, driven by the impetus which swept across core FI space early on, with 10-Year debt outperforming. Aussie bond futures stabilised after the initial uptick, refusing to ease off alongside their U.S. & Japanese peers; XM sits +3.0 & YM +1.5 as we type. Bills trade -1 to +4 ticks through the reds. Australia/U.S. 10-Year bond yield spread continued to tighten to levels not seen since March 2020.