Not Much Relief From Evergrande Making Late Coupon Payment, RBA Enforces YCT

TYZ1 trades -0-02 at 130-04, shy of the peak of its 0-06 Asia range, while cash Tsys firmed by 0.5-2.5bp, bull flattening in the process. The move represented a pullback from the late NY lows which were inspired by breakeven dynamics (Asia hours saw NY Fed President Williams stress that long-term inflation expectations are "in line with 2%") and another round of FOMC hike repricing, which saw 10-Year yields top out just ahead of their mid-May highs. The previously outlined repayment of a missed coupon on a US$ bond issued by China Evergrande within the 30-day grace period provided some very modest & brief pressure for Tsys, although markets quickly switched focus to a similar missed payment that needs to be fulfilled late next week. Flash PMIs from Europe & the UK will headline ahead of Friday's NY session. Elsewhere, we will hear from Fed's Powell & Daly ahead of the Fed's pre-meeting blackout period.

• JGB futures sit 9 ticks lower on the day, following the broader ebb & flow of core FI markets. The cash curve has been subjected to some twist steepening pressure, while swap rates have pulled back from their early peaks. Y300bn of multi-tranche green issuance from NTT finance headlined the corporate issuance slate.
• YM & XM sit 2.0 & 3.0 below yesterday's settlement levels, in the top half of their respective ranges, but shy of their Sydney peaks. Action in the ACGB space saw the RBA defend the 0.10% yield target on ACGB Apr-24 for the first time since Feb, buying $A1.0bn of the line after hiking repo costs (the cost of shorting) back on Monday failed to weigh on yields. The line last yields ~0.12% after challenging 0.18% early on.