Tsys Drift Lower In Pre-NFP Asia Trade

T-Notes have seen some modest pressure overnight, with Thursday's cheapening impetus seemingly spilling over into Asia-Pac dealing given the lack of macro headline flow, allowing the contract to move through Thursday's trough. Still the contract continues to operate within a fairly narrow 0-05 range, last -0-05 at 134-11, 0-01 off lows. Cash Tsys print ~0.5-1.5bp cheaper on the day, with some modest bear steepening in play. The most notable round of overnight flow has focused on the upside, with the TYU1 134.00/135.00 call spread lifted 10K times (5.0K outright, 5.0K covered). The monthly NFP print headlines the NY docket on Friday.

• JGB futures have played catch up after outperforming overnight, last sitting 8 ticks below yesterday's settlement levels. The cash JGB curve saw some light twist steepening pressure around the belly of the curve, although yields sit within the confines of -/+1.0bp vs. yesterday's closing levels in net terms. The latest round of domestic wage and household spending data provided a notable set of misses vs. exp. A quick reminder that Japan will observe a national & market holiday on Monday, so JGBs will be closed.
• Over in Australia YM is -2.0 & & XM is -2.5 at typing, although the drift lower in U.S. Tsys seems to be the driving factor there, as opposed to developments surrounding the RBA. We had most of the loose details surrounding the RBA's key economic projections on Tuesday, via the statement that accompanied the Bank's latest monetary policy decision. The tone of RBA Governor Lowe's testimony was upbeat (matching the "half full" label on his coffee cup), albeit cognisant of risk, which was reflected in the Bank's '21 projections re: economic growth (only shaving 0.75ppt off of its '21 GDP growth call, despite the recent lockdowns), while the Bank marked its '22 GDP exp. higher, aided by base effects. The Bank's end '21 unemployment rate estimate was left unchanged at 5.0%. Comments surrounding the AUD (effectively happy with AUD weakness, although noting it wasn't a target) & macroprudential matters (no need at present but could be a need in a year or so) generated the most interest when it came to Lowe's address. A$700mn of ACGB Nov '25 supply passed smoothly, with the weighted average yield printing 0.75bp through prevailing mids at the time of supply (per Yieldbroker). The latest AOFM weekly issuance schedule sees a slightly longer long bond on offer next week (ACGB 3.25% 21 June 2039), although the size of that auction will be a tiny A$300mn (A$523K DV01).