TYM2 Support Holds On First Test

TYM2’s technical support at the Mar 12 ’19 low (122-12), based on a continuation chart, held to the tick on the first test during Asia-Pac hours, limiting volatility during the second half of Asia-Pac trade, with a lack of fresh headline flow evident during overnight dealing. TYM2 is last -0-07 at 122-17, after bouncing a little from the aforementioned support level on volume of 140K. Meanwhile, cash Tsys run 0.5-2.0bp cheaper on the day, bear steepening, with almost all of the major benchmark Tsy yields tagging fresh cycle highs in Asia hours, before pulling back from extremes. The aforementioned technical support in TYM2 and the long-term bear channel top in 10-Year Tsy yields (2.5419%) provide some market reference points that are worth watching in the immediate term. There wasn’t anything in the way of tangible reaction to comments from Cleveland Fed President Mester (’22 voter, hawk), who flagged her desire to raise rates to 2.50% by the end of the calendar year (above the median Fed dot of 1.875%), underscoring a desire to move at 50bp clips at some meetings. Asia-Pac flow was headlined by an FV/TY block (3K vs. 2K) although direction of the trades was hard to ascertain, some pointed to a steepener, but it is hard to be sure. Looking ahead, NY hours will bring new home sales data and Fedspeak from Powell, Daly & Bullard (all of whom have spoken in recent days). Tsy supply will consist of 20-Year Tsys and 2-Year FRNs

• JGB futures extended losses during the early rounds of Tokyo afternoon dealing, with a light uptick in the offer/cover ratio witnessed in today’s 5- to 10-Year BoJ Rinban operations pressuring that zone of the curve (note that the aforementioned offer/cover ratio was by no means elevated). The contract printed fresh cycle lows, before edging away from worst levels to close -11. Weakness in the longer end of the cash curve also extended, before paring back from extremes, with 30s and 40s ~1.5bp cheaper on the day at the bell, with twist steepening observed, as paper out to 5s traded little changed to 0.5bp richer. 10-Year JGB yields moved within 0.5bp of the level that triggered BoJ fixed rate operations back in in February (0.23%), before moving back from their peak.
• Offshore cues from U.S. Tsys remained front and centre for Aussie bonds, after the early Sydney vol., with futures closing above their respective session troughs (note that XM pushed through its early Sydney low before recovering). YM & XM were -5.5 at the bell, with light bear steepening observed in cash ACGB dealing.