Tight Asia Trade Ahead Of U.S. CPI

U.S. Tsys saw some very light pressure on the back of firmer than expected Chinese inflation data but have moved off Asia cheaps, aided by a downtick in Chinese equities. TYZ1 last -0-04 at 131-23, operating within a 0-05 range in Asia hours. Cash Tsys run 0.5-1.0bp cheaper across the curve. China's NBS noted that the weather and commodity prices impacted October's CPI reading, while the PPI reading was driven by tight supply in the energy and materials spaces. It is probably a case of these being known factors when it comes to the broader inflationary picture, as well as a sense of the market having bigger fish to fry later today i.e. U.S. CPI. 30-Year bond supply provides the other notable risk event on Wednesday's local docket, coming in the wake of two tailing Tsy auctions which experienced lower than average cover ratios, even with the notional size on offer being cut vs. prev. auctions. Elsewhere, focus will fall on whether or not Evergrande makes a payment covering coupons on US$-denominated debt before the grace period ends later today.

• The JGB space was a little more resilient than U.S. Tsys, with futures last +5, while cash JGBs run little changed to ~1.5bp richer across the curve, with light bull flattening in play. Offer/cover ratios at the latest round of BoJ Rinban operations (covering 1- to 10-Year paper) nudged slightly higher, but the degree of the upticks witnessed proved to be inconsequential for markets.
• Range bound trade was the order of the day in Sydney, with the curve holding flatter, YM -1.0 & XM +5.0 at the close. The relative stability of the market vs. what was seen a couple of weeks ago has allowed corporate/SSA issuance to trickle back in over recent sessions. Elsewhere, we saw another smooth enough round of ACGB supply, at least on the pricing front, with the weighted average yield printing 0.39bp through prevailing mids (per Yieldbroker), although the cover ratio slipped just below the 3.00x marker.