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Consolidation Mode But Remains Bearish


Fails To Hold Onto Thursday’s High


'Big Tech' Bill Goes To Senate


Oil Up For Fifth Week On Supply Disruption, Geopolitics

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TYH2 has pulled back from best levels, last +0-04 at 130-23, while cash Tsys run ~1.0bp cheaper to ~1.0bp richer across the curve (2s have slipped into negative territory, while the belly & longer end has richened modestly on net). The Senate’s approval of a stopgap funding deal to prevent a government shutdown has probably helped the space off of highs (even if it just kicks the can down the road), with markets starting to fade the initial knee-jerk bump higher which was seen on the back of a handful of Omicron cases springing up across the U.S. (a reminder that the mortality threat of the new COVID strain remains unknown, although markets remain jittery around related headlines). E-minis are now flat to higher on the day, with a reversal in the Hang Seng’s early losses and a bid in oil prices no doubt helping to pressure Tsys away from highs. NFPs and the latest ISM services survey print will headline during NY hours. We will also hear from St. Louis Fed President Bullard (’22 FOMC voter) ahead of the pre-FOMC blackout period.

  • JGB futures sit +14 at the bell, extending on their modest overnight gains. The major JGB benchmarks are little changed to ~2.0bp richer across the curve, with 7s & 40s outperforming on the curve. The 7-Year rally pointed to a futures-driven bid, while 30+-Year paper was seemingly aided by receiving flows in the swap space. JGBs initially drew support from the Omicron-related bid in U.S. Tsys. In local news, Finance Minister Suzuki looked to play down any worries re: cash handout expenditure, pointing to the contribution to consumption. The BoJ Rinban operations covering -1 to 5- and 10- to 25-Year JGBs were a bit of a non-event, with bland offer/cover ratios witnessed.
  • The ACGB space piggybacked the Omicron-driven bid in U.S. Tsys, and was more reluctant to give back the bid, leaving YM +3.5 and XM +7.0 at the close. Collateral shortage/short covering seemed to fuel strong pricing at the latest round of ACGB Apr-24 supply, with the cover pointing to a lack of broader interest at the auction (see earlier bullet for more colour on that matter). The AOFM chose to maintain it’s A$2.5bn weekly ACGB issuance rate next week, while paring back Note supply to A$2.0bn after a couple of weeks at A$5.0bn.