AUSSIE BONDS: Holding Richer Ahead Of US Payrolls & Fed Chair Powell Speech

• Tsys futures were slightly lower in morning trading, however has since pared losses to trade little changed. TU is -00¼ at 102-26⅞, while TY is unchanged at 109-06+.
• Treasury futures continue to trade below their recent highs. A corrective cycle remains in play and the contract is holding on to the bulk of its recent gains. TY key resistance at 109-10, the 50-day EMA, has been pierced. A clear break of it would strengthen a bullish theme and open 109-31, the Dec 18 high. The medium-term trend condition remains bearish. The bear trigger is 107-06, the Jan 13 low. Initial firm support is 108-06, the Jan 23 low.
• Cash tsys yields initially traded 1-2bps higher this morning, however has since reversed those moves with yields now flat to 0.5bps lower. The 2yr is unch at 4.214%, while the 10yr is -0.4bps at 4.507%, the 10yr has traded in a roughly 10bps range for the past two weeks now, while the 2s10s has flattened about 4bps over the same period.
• US Postal Service is stopping inbound parcels from China and Hong Kong in potentially another sign of worsening trade tensions between Beijing and Washington.

Yen gains have dominated the G10 space so far in Wednesday trade. USD/JPY was last near 153.20/25, up slightly on earlier lows of 153.10. We are +0.70% firmer in yen terms for the session so far. We are sub the Dec 18 low (153.34), with scope for a move towards 152.55, 61.8% retracement of the Dec 3 - Jan 10 bull leg.

• Not surprisingly, USD/JPY has dominated the options volumes per DTCC. Yen has accounted for just over $5.2bn of the $12.6bn seen so far today.
• In terms of the larger ticket sizes, we saw a USD put at 100.73 strike (expiry Feb next year) go through for over $200mn. We have seen a variety of other transactions go through, with USD calls at 157 and 161 for nearly $200mn. Most strike rates have been set at lower spot levels that what currently prevail though.
• For this upcoming week, the largest volume of strikes are at 145.00 (just under $2.9bn). This is followed by 154.00 ($2.8bn), then 135.00 ($2.6bn), followed by 156 to 153 region, with volumes at these strike level between $1.3bn to $1.45bn. 

ACGBs (YM +2.0 & XM +5.0) are richer and at Sydney session bests on a data light day.

• Outside of the previously outlined S&P Global PMIs, there hasn't been much by way of domestic drivers to flag.
• Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest rally. Focus in the US turns to today’s ADP private employment data ahead of Friday's headline NFP data for January, not to mention the US Tsy quarterly refunding announcement, S&P Global US Services PMI and ISM Services data.
• Cash ACGBs are 2-5bps richer after being 2-4bps cheaper earlier. The AU-US 10-year yield differential is at -14bps versus -8bps early.
• The AOFM issued by syndication A$15.0bn of the new 4.25% Mar-36 bond at a YTM of 4.46%. A total of A$83.4bn was bid at the final clearing price.
• Swap rates are 3-5bps lower, with the 3s10s curve flatter.
• The bills strip slightly mixed.
• RBA-dated OIS pricing is slightly mixed across meetings today. A 25bp rate cut is more than fully priced for April (134%), with the probability of a February cut at 90% (based on an effective cash rate of 4.34%).
• Tomorrow, the local calendar will see Trade Balance data.