RBNZ Applies Some Pressure To Core FI Markets

T-Notes traded a touch cheaper during Asia-Pac trade, although there was a lack of notable news flow outside of the hawkish surprise provided by the OCR track that accompanied the RBNZ monetary policy decision. T-Notes last -0-02+ at 132-28+, while cash Tsys saw some modest bear steepening as 20s provided the weak point on the curve, cheapening by ~1.5bp as of typing. T-Note volume hovers around 280K, although ~175K of that has come via the roll, with the latest estimates pointing to ~65% of the TY roll being completed at present. Overnight flow was headlined by a 5.0K block sale of the TYN1 132.50 calls.

• JGB futures last +3, sticking to a tight range during Tokyo hours, but backing off from best levels given the pressure seen elsewhere in the core global FI complex. The major cash JGB benchmarks trade little changed to 1.0bp richer on the day at typing, off best levels. Speculation re: the elongation of the states of emergency in play in Tokyo/wider afield continue to do the rounds. Re: the Olympics, Asahi Shimbun, an official partner of the Tokyo games, called for the cancellation of the event, although ruling party lawmaker Yamamoto told RTRS that Japan will hold the games and the event will be "good for the economy." Yamamoto also noted that the government is expected to compile an extra budget in October/November, with the aim of cushioning the economic blow from the COVID-19 pandemic.
• Aussie bond futures trickled lower in the wake of the latest RBNZ monetary policy decision across the Tasman, with the previously outlined hawkish inferences from the contents of the resumed publication of the RBNZ's OCR track and tweaks to its forward guidance weighing on NZGBs, creating some trans-Tasman spill over. Still, cash ACGBs comfortably outperform their NZ equivalents on the day. YM -1.0, XM +1.0 last, with the wider cash curve seeing a similar degree of twist flattening, although operating off of early session flats. Local data (in the form of stronger than expected completed construction work data for Q1 & another uptick in the Westpac leading index) did little for the space.