[MARKET ANALYSIS] Fixed income benchmarks rangebound, with Japan and US auctions ahead

Global fixed income benchmarks trade rangebound, helped by the lack of movement in energy prices. Government debt continues to be hit when energy benchmarks take a leg higher, as worries of pass-through into inflation alter the central bank’s policy reaction. UST Futures oscillate in a narrow 128-27 to 108-31 band, with the 10yr yield topping just shy of the 4.60% mark in Wednesday’s session. The 10-year bond auction brought in strong demand, similar to the 3-year auction on Tuesday; however, this was dismissed as geopolitics remain front and centre. Ahead is a 30-year auction, which may bring strong demand as the 30yr yield returns back above 5.00%. Bund Futures, similarly, trades in a tight 13-tick range. Contrary to the US auction, the 10-year Bund auction was poor. Debt fell following the auction; Bunds were already lower by c. 80 ticks pre-auction. The ECB minutes for the June meeting is on the docket later, with focus on how the committee viewed the July vs September argument at the time. JGB Futures rotate in a 126.39-126.65 range. Moody’s came out with some positive commentary for Japan, reiterating its stable view despite the prospect of trillions of dollars of government spending. Results from a 5-year JGB auction are expected at 04:35BST.