U.S. Tsys Muted Pre-CPI, JGBs Cheapen

E-minis moved away from their late NY session highs, lending modest support to U.S. Tsys during Asia-Pac trade. TYH2 last -0-02 at 126-22 as a result, 0-01+ off the peak of its 0-05 Asia-Pac range and away from Wednesday’s late NY lows. Cash Tsys run 0.5-1.5bp richer across the curve. There hasn’t been much to move the broader macro needle, with the latest round of headlines surrounding China’s management of the troubled property sector failing to generate a market reaction. Participants largely remain sidelined ahead of today’s U.S. CPI print. However, it wasn’t completely quiet on the flow front, a 6K block sale of TU futures and 40K delta hedged block buy of FVJ2 117.25 puts headlined overnight. On top of CPI, wage data and 30-Year Tsy supply provide further points of interest during NY hours.

• The latest round of cheapening didn’t lure participants into picking up off-the-run 15.5- to 39-Year JGBs at today’s liquidity enhancement auction, with spreads witnessed at auction widening, alongside a widening in the gap between the average and high spread observed when compared to the previous auction. The cover ratio held steady, just above 2.00x, although that is by no means firm. Some had suggested that the recent cheapening of super-long JGBs may draw increased lifer demand into the fold at today’s auction, that didn’t seem to occur. The super-long end led the cheapening post-supply, while JGB futures came under selling pressure, although that contract failed to break below its recent cycle low, subsequently recovering from worst levels of the day. 10-Year yields have registered a fresh cycle high, printing 22.8bp, with the major JGB benchmarks 0.5-4.0bp cheaper on the day, bear steepening. BoJ Governor Kuroda stressed that he sees no chance of a reduction in easing via a Mainichi interview that hit late in the Tokyo session.
• Aussie bond futures stuck to narrow ranges. There was a distinct lack of domestic news flow to provide any impetus. YM finished +1.5, with XM unch., after showing lower in early Sydney dealing. Cash ACGBs are flat to 1.5bp richer across the curve, with the long end underperforming. A reminder that today’s RBA ACGB purchases represented the final round of outright purchases under the RBA’s QE scheme (a decision surrounding the reinvestment of maturing bonds held under the scheme will come in May).