Russian Special Military Operation In Ukraine Supports Bonds

Russian President Putin announced a special operation to demilitarise Ukraine overnight. Russian troops advanced within the LPR & DPR separatist regions, while wider spread missile and air-based attacks on Ukrainian military installations across the country were noted. U.S. President Biden has flagged impending severe sanctions on Russia, with U.S. allies also set to move to implement similar sanctions.

• This shunted core global fixed income markets higher, with TYH2 through initial resistance levels to last print +0-30 on the day, sitting at 127-07, 0-10+ back from best levels of the day. TYH2 volume has topped 500K (90K of which was roll related). Cash Tsys run 8-12bp richer on the session, with 7s leading the bid. Looking ahead, regional Fed activity indices, weekly claims data, updated Q4 GDP prints and new home sales will hit. We will also hare from Fed’s Barkin, Bostic, Daly & Mester. On the supply front, Tsy will come to market with 7s.
• The JGB curve twist steepened today, with the long end leading the weakening observed during the Tokyo morning (on the back of the post-holiday catch up), while super-long paper failed to return to neutral territory during the Tokyo afternoon, even with clear, widespread risk-off price action in play. JGB futures have moved into positive territory, more than paring early losses, to close +10. Local headline flow saw BoJ Governor Kuroda reaffirm the Bank’s on hold stance (as he has done on many occasions in recent weeks), while the latest round of BoJ Rinban operations (covering 3- to 10-Year JGBs and JGBis) saw offer/cover ratios in the low 2s (upticks for cover in the conventional JGB ops conducted today, but still holding at low levels, and a moderation in JGBi cover).
• Aussie bonds traded at the whim of broader risk sentiment, looking through local Capex data. That left YM +9.5 & XM +11.5 come the bell, with shift in the 7+-Year zone of the cash ACGB curve being fairly parallel in nature. The IB strip also richened, with a 15bp RBA rate hike now not fully priced until July.