U.S. Tsys Fail To Extend Recent Bid, JGBs & ACGBs Firm A Touch

Asia-Pac investors didn't seem particularly keen to drive a fresh bid in the U.S. Tsy space, which is understandable given the lack of fresh macro catalysts evident since the NY close, alongside the multi-month lows registered in both 10- & 30-Year Tsy yields on Tuesday. This has resulted in some modest cheapening in the space, with T-Notes +0-01+ at 133-08+ as a result, while cash Tsys run little 0.5-1.5bp cheaper, with the 5- to 7-Year zone leading the way. Flow was dominated by a TYU1 block, which saw 2,175 lots lifted (~$176K DV01 equivalent).

• JGB futures added to their overnight gains during Tokyo trade, with the contract +23 vs. settlement levels at typing. Cash trade saw 7s lead the rally, richening by a little over 2.0bp, indicating that the move may have been futures driven, with the wings of the curve a mere 0.5-1.0bp richer. 30- & 40-Year swap rates dipped a little more than their cash JGB equivalents, narrowing longer dated swap spreads. The offer to cover ratios witnessed at the latest round of BoJ Rinban operations were as follows: 1- to 3-Year: 3.05x (prev. 3.43x), 5- to 10-Year: 3.25x (prev. 2.25x). Note that the 5- to 10-Year operations saw a Y25bn reduction in the purchase size, as prescribed in the Bank's quarterly Rinban plan.
• YM +5.0, XM +9.5 at typing, as Sydney participants built on the overnight bid. A quick look at the open interest data points to fresh shorts driving the YM weakness during Tuesday's session, with that move lower now unwound. The weighted average yield pricing through prevailing mids wasn't particularly strong at today's A$1.0bn round of ACGB Jun '31 supply (0.13bp, per Yieldbroker), with the richening to recent lows in outright yield terms and resultant move in the 3-/10-Year yield spread to multi-month flats likely resulting in a less aggressive bidding stance. Still the cover ratio nudged higher vs. the prev. auction of the line, comfortably topping 3.50x. Local news flow was dominated by the 1-week extension of the Sydney lockdown, although this was widely expected.