Mixed Trade for Core FI

With oil futures back from their early Asia highs and ACGBs bid post-SOMP, the U.S. Tsy space regained some ground after a soft start to Asia-Pac trade. Note that a tweak to the PBoC's daily OMOs also provided a helping hand. TYZ1 last -0-04 at 131-06, while cash Tsys run 0.5-1.0bp cheaper across the curve, as the belly provides some incremental underperformance. Odds of Fed Chair Powell being nominated to serve a second term rose after the WSJ reported that he was seen at the White House on Thursday, while Axios sources noted that "the White House is asking Democratic senators to meet with Federal Reserve chair Jerome Powell before Thanksgiving - leading some to believe President Biden will renominate him this month." NFPs headline the local docket on Friday, with Fedspeak from Geroge & Quarles also due. BoE speak is also set to provide some interest (and potential cross-market impact) in the wake of yesterday's inaction on Threadneedle Street.

• JGB extended their overnight gains as local participants reacted to the BoE-driven overnight bid, before paring back from best levels into the lunch break. A bid then came back in during the afternoon session, with a lack of meaningful fiscal upheaval clearly evident in the latest round of communique from both the Finance & Economy Minister. The major cash JGB benchmarks run little changed to 1.5bp richer, with bull steepening in pay as the long end lags. We also saw Japanese Finance Minister Suzuki confirm earlier speculation re: the government considering Y100K handouts for under 18s, while underlining the need for fiscal discipline.
• There was a sharp move lower in Aussie bond futures into the close, leaving YM +4.0 and XM +2.0 come the bell. The former broke its early Sydney low, while the latter tested its own Sydney low. There was no headline flow to account for the move, perhaps a case of locals undertaking some pre-NFP book squaring. The space had moved away from early Sydney lows on the back of the RBA SoMP, which saw a slightly harder lean towards the RBA maintaining '24 as the timing of the first cash rate hike as its base case vs. Tuesday's communique, although there is clearly some optionality embedded. PBoC OMO liquidity dynamics also provided some support. The cover ratio at the latest ACGB Apr-25 auction wasn't particularly firm, with the recent vol. and removal of micro curve interest likely resulting in a much less aggressive stance when it came to capital deployment. Still, the pricing on the auction was far more encouraging, with the weighted average yield printing 0.87bp through prevailing mids (per Yieldbroker). The well-documented supportive factors and hedgability of the line (flagged ahead of the auction) ultimately prevailed, providing smooth passage.