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Risk Aversion Lingers, 10-Year JGB Auction Draws Lowest Bid/Cover Ratio Since 2015

BOND SUMMARY

JGB futures crept higher as the Nikkei 225 tumbled alongside other major Asia-Pac equity indices, but pulled back off session highs at 151.48 after the lunch break. The latest 10-year JGB auction drew the lowest bid/cover ratio (3.038x) since 2015, while low price was marginally higher than forecast in the BBG poll. As we type, JGB futures trade at 151.45, 5 ticks north of last settlement. Cash JGB yields are broadly lower across a slightly flattened curve, with 10s outperforming. The space was unfazed by a strong beat in Japanese household spending print for the month of March.

  • T-Notes last trade +0-01+ at 132-21 after topping out at 132-23+. Cash Tsy curve bull flattened on the back of broader risk-off impetus, which sent e-minis & major regional equity indices lower; Tsy yields last trade 0.2-1.6bp lower. Eurodollar futures trade -0.5 to +0.5 tick through the reds. There is plenty of Fedspeak coming up today.
  • XM unwound their initial uptick and last trade -1.5, with YM unch. Cash ACGB curve has bear steepened a tad, yields last sit -0.5bp to +1.6bp. Bills trade unch. to -1 tick through the reds. The AOFM sold A$100mn of Feb '50 linker, drawing a bid/cover ratio of 3.600x. The bond was last auctioned in 2019. The syndication of AUSCAP May '30 is expected today.

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