More Weakness For Core FI In Asia

Broader flows were at the fore overnight, with little in the way of meaningful headline flow observed. Core fixed income markets initially showed lower on spill over from the weakness in U.S. Tsys during Tuesday's session, before stabilising as the Nikkei 225 and e-mini moved into negative territory, reversing early gains. The space then moved lower again as U.S. 10-Year yields registered a fresh multi-month high.

• That leaves T-Notes -0-09 at 131-14+, with the cash Tsy curve bear steepening as 30s cheapen by the best part of 5bp on the day. A 5K block buyer of USX1 157.50 puts headlined during Asia-Pac hours. Wednesday's U.S. docket is dominated by the latest ADP employment report.
• JGB futures followed the broader gyrations, with the contract last -16 on the day. 20s provided the weakest point on the cash JGB curve, softening by a little over 1bp on the day as of typing. 5+-Year swap spreads have seen some widening, pointed to pay-side flows as one of the drivers as the move. Recent comments from BoJ Governor Kuroda haven't offered anything new, as he pointed to well-documented headwinds for inflation
• ACGBs marched to the beat of the broader drum, leaving YM -4.0 and XM -8.0 at typing. A$1.0bn of ACGB Nov '32 supply was easily digested, with the weighted average yield printing 0.43bp through prevailing mids at the time of the auction (per Yieldbroker pricing). The cover ratio was closer to 6.00x than it was 5.00x, with the well-trodden supportive factors and recent cheapening supporting demand (amongst other factors, which were outlined in our preview). Elsewhere, the APRA introduced slightly tighter mortgage lending restrictions, with deeper macroprudential measures expected further down the track.