MNI EXCLUSIVE: MNI speaks with former senior RBA economist John Simon

The latest ACGB May-41 supply auction continued the recent trend of firm pricing, with the weighted average yield printing 0.22bps through prevailing mids (per Yieldbroker).

• The cover ratio increased to a robust 3.7875x, reflecting solid demand.
• Today's auction was likely bolstered by steeper 3/10 and 10/20 yield curves and the recent improvement in sentiment toward longer-dated global bonds.
• In early post-auction trading, XM futures and the bond line have shown little movement.

USD/JPY is continuing to recover, the pair last near 152.90, near session highs and up 0.30% versus end NY close levels from Tuesday trade. Japan markets return today after yesterday's public holiday, so there could be some focus on the Tokyo fix, as last week USD/JPY tracked lower in the lead up to the fixing. Other G10 movements are close to unchanged at this stage.

• For USD/JPY technicals, we are testing the Feb 6 highs of 152.89. Note the Jan 27 low of 153.72 is a further potential upside target. The 50-day EMA is back at 154.70. Note as well some option expiries today (for NY cut later), Y153.00-15($884mln), Y153.50-70($1.7bln), which could influence spot.
• The firmer core yield backdrop is aiding the USD/JPY rebound, weakness in yen against crosses. US-JP yield differentials have ticked up from recent lows, the 10spread more so than the 2yr. The 10yr was last +321bps, against recent lows of +313bps.
• BoJ Governor Ueda will appear in parliament at 10:05am local time, so in just under an hour. 

The AOFM sells A$400mn of the 2.75% 21 May 2041 bond, #TB156:

• Average Yield (%): 4.7553 (prev. 4.8759)
• High Yield (%): 4.7575 (prev. 4.8800)
• Bid/Cover: 3.7875x (prev. 3.3333x)
• Allotted at Highest Accepted Yield as % of Bid at that Yield (%): 75.7 (prev. 37.5)
• Bidders: 41 (prev. 49), successful 14 (prev. 16), allocated in full 9 (prev. 9)