Rebalancing, When & How Much?

Cash Tsys are a touch flatter, with yields unchanged to 1.1bp richer across the curve, as end-of-year focus remains zoomed in on fiscal developments in DC. T-Notes unch. at 137-27+, sticking to a narrow 0-03+ range thus far, with macro headlines light during early Asia dealing. There has also been some interest in rebalancing flows into year-end (which are seen as equity -ve, bond +ve).

• JGB futures shrugged off the latest BoJ decision, with the upcoming assessment of the Bank's QQE with YCC scheme on the back of the sustained deviation from its inflation target flagged ahead of time by the Nikkei. There is little scope for major policy tweaks stemming from the assessment given the Bank's comments re: QQE with YCC i.e. there is no need to change the framework. The corporate liquidity provision extension was in line with broader expectations, at least in terms of time horizon (through the end of Sep '21), with the scheme made a little more generous overall (see earlier bullet for further details). Futures are now -3 on the day, with yields little changed across the JGB curve.
• The Aussie bond space continues to operate within narrow ranges, with YM -0.5 & XM -1.0. Focus remains on the domestic COVID-19 situation and guidance from the NSW government which advised residents in one of Sydney's suburbs to stay at home as much as possible over the next three days to fight the cluster that has emerged. The cash ACGB curve has seen some light twist steepening.