Mixed Performance For Core FI

T-Notes held to a very narrow 0-03 range overnight, last +0-03 at 132-19+. Cash Tsys trade unchanged to 1.0bp richer across the curve. Headline flow remains light, with ongoing bi-partisan Senator level meetings re: fiscal matters confirmed for this week, although certain, high-ranking quarters of the Democratic party continue to point towards the need for reconciliation measures. Elsewhere, the latest U.S. naval incursions into the South China Sea had little impact on broader sentiment.

• The JGB curve runs steeper on the day, while futures have recovered from their overnight lows to last print -6. There has been little to really move the market, at least meaningfully, with the previously outlined BoJ, COVID and political headlines offering little new on net. The latest liquidity enhancement auction for off-the- run JGBs with 15.5- to 39-Years until maturity was on the softer side, in terms of both cover ratio and spread dynamics.
• Aussie bond futures are a little flatter, YM -1.4, XM +1.2. The minutes from the RBA's June meeting pointed to an extension of the Bank's broader bond buying scheme, with a variety of scenarios re: the future shape of purchases sketched out (including a straight rollover of the existing scheme, scaling back the amount purchased or spreading the purchases over a longer period, or moving to an approach where the pace of the bond purchases is reviewed more frequently, based on the flow of data and the economic outlook). Re: the potential extension of the Bank's yield targeting measure to ACGB Nov '24, the board noted that it "had previously stated that it would not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. A key consideration for the decision regarding the yield target would be an assessment of the prospect of this condition being met some time in 2024." It also noted that market pricing indicated that bond market participants "did not, on balance, expect the yield target to be extended."