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No Let Up For Core FI In Asia

BONDS

Core FI markets continued to leak lower during Asia-Pac hours, with FT reports pointing to the potential for de-escalation when it comes Russia-related geopolitical tensions potentially aiding the cheapening.

  • TYH2 took out Monday’s Asia lows, with focus now switching to nearby Fibonacci support (126-16), as the contract trades -0-09+ at 126-19+, just off worst levels of the day. Cash Tsy trade saw 10-Year yields register fresh multi-year highs (with the same holding true for 2s & 5s), with the major benchmarks cheapening by 2-4bp, as the front end led the way lower. A 2.5K block sale FVH2 118.50 puts headlined on the flow side in Asia. NFIB small business optimism data and the latest round of 3-Year Tsy supply headline the NY docket on Tuesday.
  • JGB trade saw the curve bear steepen, with the major benchmarks cheapening by 0.5-3.0bp on the day. Participants remain wary of the potential for BoJ enforcement when it comes to the top end of the Bank’s permitted trading band (0.25%), with that particular benchmark operating around the 0.21% level. JGB futures respected post-NFP lows, closing -18 on the day.
  • Broader core FI weakness, trans-Tasman impetus from NZ bonds (although part of that reflected a degree of catchup after the long weekend in NZ), a couple of major sell-side institutions pointing to hawkish risks re: their RBA calls and an ex-RBA board member pointing to cash rate lift off by August and the likelihood of a 1.00% cash rate target at year end (which is a little less hawkish than market pricing at present) all applied pressure to the ACGB space, after futures steepened in overnight dealing. That left YM -8.5 & XM -12.5 at the close (as steepening came back to the fore as we moved through Sydney trade). Meanwhile, the IR strip bear steepened, finishing unchanged to 10 ticks cheaper on the day.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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