Rally Resumes But Still Underperforming US Tsys

ACGBs (YM +9.8 & XM +10.8) resume their rally (but not yet threatening session highs), after an initial muted reaction to the BOJ decision. The spark has been further firming in JGBs and a push to yield lows for U.S. Tsys in Asia-Pac trade. On a relative basis, ACGBs fail to keep pace with U.S. Tsys with the AU/US 10-year yield differential +6bp at -22bp versus its cyclical low of -32bp intraday yesterday. Swaps remain well bid with rates 12-15bp lower but are 3-6bp higher than session lows set in the morning Sydney trade.

• Consistent with moves seen elsewhere in the rates space today, the bills strip is 4-12bp richer, but 5bp or so off best levels, led by the reds. RBA dated OIS softens 6-11bp for meetings beyond June with terminal rates expectations holding below the psychological 4.0% level at 3.98%. Noteworthy as well is that pricing for April has now fallen to less than a 50% chance of a 25bp hike.