REPOST: ACGBs Benefit From Lack Of RBA Policy Pivot, TYH2 Flows Eyed

ACGBS Benefit From Lack Of RBA Policy Pivot, TYH2 Flows Eyed
A modest downtick in e-minis, spill over from the ACGB space, as well as light screen & block buying (+3,310 on block) of TYH2 futures allowed the Tsy space to firm at the margin in Asia. TYH2 last +0-03+ at 128-02+, while cash Tsys run little changed to ~1.5bp richer, with light bull steepening in play. Looking ahead to the NY session, the ISM m’fing survey & JOLTS jobs data headline.

• JGB futures initially benefited from the broader bid in the core global FI space, before that impulse faded ahead of the Tokyo close. The latest round of 10-Year JGB supply was absorbed smoothly, with the cover ratio perhaps hampered by worries re: further cheapening in the international bond space & speculation re: tweaks to the BoJ’s YCC scheme. Still, several relative value plays (identified pre-auction) likely helped when it came to the smooth digestion. There wasn’t a clear catalyst for the modest cheapening witnessed during the latter rounds of Tokyo trade. JGB futures -15 come the bell, with cash JGBs running 0.5-1.0bp cheaper across the curve.
• Aussie bonds firmed in the wake of the RBA decision, with the continued inclusion of the willingness to be patient in the Bank’s forward guidance passage re: interest rates providing a bit of a surprise/dovish tinge to the statement. Note that the Bank marked its expectations higher when it comes to the peak of underlying inflation in the near-term and the underlying inflation profile for ’23, but continues to expect wage growth to be the limiting factor when it comes to inflationary pressures (although it did highlight several well-documented risks/uncertainties surrounding its view). The Bank seemingly failed to make any meaningful adjustment when it comes to GDP growth expectations, while it marked its unemployment forecasts lower in the wake of the recently observed dynamic in that space. YM -1.5 & XM -0.5 at the bell, off the RBA-reaction highs, but comfortably off early Sydney lows. Bills were -1 to +8 through the reds, twisting steeper on the day, with some of the front-end rate hike premium wound out of the strip post-RBA.