U.S. Fiscal Impulse Pressures Bonds

Tsys worked their way lower in Asia-Pac hours, with focus on the potential for an upsizing of U.S. fiscal & infrastructure support spilling over from the latter part of the NY session. This took 10-Year yields to within touching distance of the recent cycle highs, last printing at ~1.744%. The March 18 high resides at 1.7526%. A break would allow bond bears to switch focus to the nearby 50% retracement of the move from the '18 high to the '20 low, located at 1.7866%. On the flow side a 3.0K block seller FVM1 provided the highlight, as 5s printed above 0.900% in yield terms for the first time since Mar '20. T-Notes last -0-07+ at 131-04. 7+-Year Tsys sit ~3.5bp cheaper on the day.

• JGB futures extended lower during the Tokyo afternoon, playing catch up to the aforementioned round of U.S. Tsy weakness, to last print -20 on the day. The 4- to 5-Year zone of the cash curve has richened a little on the day, while the remainder of the curve sits up to 1.0bp cheaper. Better than expected local monthly retail sales data had little in the way of tangible impact on the space, with the same holding true for the virtually in line with expectations labour market report. The low price at the latest 2-Year JGB auction came in below broader dealer expectations (100.260 per the BBG dealer poll), with the cover ratio sliding and tail widening. Looks like the proximity to FY end may mean that Japanese investors chose to keep at least some of their powder dry, which could stem from the allure of the yield of some foreign core global bonds in FX-hedged terms. We also saw the Philippines price Y55bn of 3-Year Samurai paper.
• Aussie bonds were dragged lower by U.S. Tsys, YM -4.5, XM -10.0 at typing. The local labour market continued to reveal positive news. Alongside the latest round of payrolls data, the ABS noted that "after a seasonal peak and fall across the summer months, payroll jobs at mid-March 2021 were slightly above the levels of a year earlier. By mid-March 2021, most state and territory payroll jobs had either reached or passed levels of a year ago. Tasmania and Victoria were the exceptions." Elsewhere, Volkswagen Financial Services launched a 3- & 5-Year A$ senior unsecured benchmark transaction, which is set to price today.