Soft 10-Year JGB Supply, RBA Speculation Does The Rounds

T-Notes are unchanged at 131-30 at typing, holding to a narrow 0-02+ range overnight. Headline flow remains light. Cash Tsys are little changed to 0.5bp cheaper across the curve. Eurodollar futures trade -0.25 to +1.0 through the reds. Flow has been headlined by downside interest in EDZ3 via the options space, which saw 5.5K of the 2EZ1 99.000/98.875 put spread trade vs. the 2EZ1 99.250/99.375 call spread, with a market contact pointing to buying of the put spread vs. selling of the call spread.

• It seems that desks were a little complacent re: the prospects surrounding the smooth takedown of today's 10-Year JGB supply, with the average price only just matching the broader expectations for the low price (per the BBG dealer poll), as the cover ratio slid to the lowest witnessed at a 10-Year auction since '15. Elsewhere, the tail widened vs. the previous auction. Crimped 10-Year ranges since the BoJ's March decision, questions over market functioning and a lack out outright/relative value appeal likely hampered takedown today. Futures softened in the wake of the auction results, briefly printing below yesterday's settlement level, before recovering to last trade +3 on the day, while cash JGBs sit little changed to 0.5bp cheaper across the curve. Elsewhere, the Asahi suggested that PM Suga is likely to call a snap election in the Autumn, after the end of Paralympic games. The report also suggested that the government is considering compiling a new stimulus package ahead of the snap election.
• YM unch., XM +1.5 in Sydney. XM is back from best levels after running out of steam just ahead of the previously flagged resistance in the form of the May 27 high (98.430), peaking at 98.425 after shorts were squeezed in early Sydney dealing. Elsewhere, domestic data was solid to firm, but had no real impact on the space. There has been plenty of speculation doing the rounds after an appearance from RBA Governor Lowe was added to the docket for 6 July, the day of the Bank's key July decision (the addition came late on Wednesday). The title of the address is "Today's Monetary Policy Decision" and it will come 90 minutes after the decision & accompanying statement are released. It has become common practice for Lowe to conduct such addresses in the wake of key monetary policy decisions, and many have suggested that he could use the address to temper any hawkish reaction in the wake of the decisions surrounding QE & the Bank's yield targeting scheme. Still, this didn't impact the market.