JGBs Keep Pushing Higher, U.S. Tsys & ACGBs Lose Initial Allure

JGBs maintained bullish momentum, diverging from U.S. Tsys and Aussie bonds which lost their initial strength. The prospect of hawkish FOMC action loomed large at the end of a week that witnessed fresh rounds of bullish Fedspeak.

• The initial uptick in T-Notes proved short-lived, with the contract plunging in afternoon trade and probing the water below Thursday's worst levels. TYM2 last changes hands -0-03+ at 120-14, hovering just above the session low of 120-11. Eurodollar futures run 1.5-6.0 ticks lower through the reds. Twist steepening evident in cash Tsy space, with yields last seen +4.1bp to -2.3bp across the curve. Wholesale inventories headline the U.S. docket on Friday.
• 10-Year Aussie bond futures moved in tandem with T-Notes, XM trades -6.0 when this is being typed. Bills run 1-4 ticks lower through the reds. Cash ACGB curve has bear steepened, with yields last seen 1.5bp-5.7bp higher, as Aussie bonds played catch up with impetus from the NY session. The RBA released the semi-annual Financial Stability Review, in which it warned against "elevated" medium-term systemic risks.
• JGB futures re-opened on a firmer footing and extended gains thereafter, posting a sharp upswing just after the Tokyo lunch break. JBM2 trades at 149.51 at typing, 4 ticks above last settlement. Cash trade saw JGBs register gains, with yields depressed across the curve, with the super-long end leading gains. Participants kept an eye on the scheduled round of 1-10 Year Rinban operations but purchase sizes were unchanged, albeit it is worth flagging downticks in bid/cover ratios, which may have supported underlying bullish momentum in afternoon trade:
  • 1- to 3-Year: 2.62x (prev. 3.02x)
  • 3- to 5-Year: 1.90x (prev. 2.64x)
  • 5- to 10-Year: 1.86x (prev. 1.92x)