JGBs Regain Poise After Confirmation Of BoJ/Fed Divergence, Tsys & ACGBs Extend Losses

Asia-Pac headline flow failed to add much to the familiar narrative, leaving familiar market dynamics in play, with focus on the policy outlooks of major central banks.

• Selling pressure hit T-Notes from the off, pushing the contract to fresh cycle lows. TYH2 edged away from worst levels (127-03+) in the Tokyo afternoon and last changes hands -0-06 at 127-06. Eurodollar futures operate 0.5-4.5bp lower through the reds. Cash Tsy curve continued to bear flatten in Asia, with the 20-Years outperforming ahead of today's auction of that tenor. The yield on 30-Year Tsys crossed above the 2.2% mark for the first time since June amid fresh cycle highs for yields across the curve. The U.S. data docket is limited to housing starts & building permits, with the main focus set to fall on aforementioned debt supply.
• Aussie bonds clung onto the tailcoats of faltering U.S. Tsys in cash Sydney trade, with yields last seen 3.2-5.5bp higher, albeit the ACGB curve has steepened a tad. The yield on 10-Year ACGBs showed above 2.0% for the first time since Oct. Main futures contracts wavered, with YM last -4.0 & XM -6.0. Bills trade 2-4 ticks lower through the reds. Westpac Consumer Confidence Index posted a somewhat surprisingly modest downtick but the ACGB space showed a limited reaction, with an auction for A$500mn of 2.75% 21 Jun '35 Bonds also largely shrugged off.
• JGB futures clawed back their initial losses and crept higher, extending gains after the Tokyo lunch break. JBH2 trades at 150.85 at typing, 11 ticks above last settlement and 2 ticks below session highs. Cash JGB curve steepened a tad, with yields easing across the curve, save for the super-long end. The BoJ yesterday gave a clear indication that they are keen to stick to their ultra-loose policy stance, which sets them apart from U.S. colleagues. Japan auctioned 1-Year Bills and conducted a liquidity enhancement auction for off-the-run JGBs with 1-5 years until maturity.