Overhang Bear-Steepening Impetus Dissipates, Futures Edge Higher

Aussie bond futures inched higher in tandem with T-Notes, while initial bear-steepening impetus in cash ACGB space moderated as the session progressed.

• The yield curve bear steepened as Sydney trade re-opened, with local players digesting the reaction in U.S. Tsys to above-forecast U.S. jobs data released last Friday. The report fanned hawkish Fed bets.
• The start to the new week brought some stability, with markets in Japan, South Korea, Malaysia and Taiwan closed for holidays, limiting regional activity. Cash ACGBs trimmed initial moves and last sit 2.3-4.3bp higher across a slightly steepened curve.
• Futures ground higher, with YM -3.5 & XM -4.0 versus prior settlement. Bills sit 2-6 ticks lower through the reds.
• In Australia, the OIS strip prices an ~86% chance of a 25bp hike to the cash rate target at the November meeting. This stands in contrast with the Fed and RBNZ, which are expected to tighten by 75bp and 50bp respectively.
• Risk-negative headlines from over the weekend may have lent some support to ACGBs today, as North Korea resumed missile tests, while China's Caixin Services PMI dropped sharply into contractionary territory.