T-Notes Extend Wednesday's Losses, JGB Futures Build On Early Gains

Spillovers from offshore markets have damaged Aussie bonds as Sydney trading got underway, while T-Notes have extended their post-auction weakness. The news that Shanghai will shut some areas for mass COVID-19 testing on Saturday has had a limited impact on the broader core FI space so far, although Aussie bond futures have moved away from worst levels as sentiment sours a tad.

• Broader losses in U.S. Tsys on Wednesday were exacerbated by a disappointing 10-Year auction that tailed the WI yield. T-Notes have edged lower still as we've progressed to the Asia-Pac session. TYU2 last changes hands -0-03 at 117-31+, with Eurodollars running unch. to -3.0 ticks through the reds. The yield curve has flattened in cash Tokyo trade, as yields sit 0.6-1.7bp higher. Weekly jobless claims and a 30-year auction headline in the U.S. today.
• Overhang cheapening impetus from the NY session, the release of RBNZ's balance sheet reduction plans and ongoing debate surrounding the inflation worry in Australia have conspired to undermine ACGBs in early trade. Cash yields have now eased off highs and last sit -0.3bp to +3.5bp across the steepened curve, although 10-year yield lodged a fresh multi-year high this morning. Futures contracts have moved away from earlier lows; YM last +0.6 & XM -3.7. Bills trade unch. to +8 ticks through the reds.
• JGB futures re-opened on a firmer footing and remain elevated. The active contract last sits at 149.56, just above its previous settlement. Cash JGB yield curve is a touch steeper amid weakness in the super-long end. There is a liquidity enhancement auction covering off-the-run JGBs with remaining maturities of 5-15.5 years slated for today.