AUSSIE BONDS: Front End Legs Lower
Weakness in the front end of the space has continued, aided by U.S. Tsys. A ~5.3bp jump in today’s 3-month BBSW fixing has also aided that dynamic. YM has crashed through the overnight lows, registering a fresh cycle low in the process, and last prints -12.0, while XM is -6.0 as the bear flattening accelerates. The 3-/10-Year EFP box has now twisted steeper on the day. The Bill strip sits 7-20 ticks lower through the reds post-BBSW fix & YM sell off. Note that there is currently a ~50bp gap between the implied interest rate observed in IRM2 and today’s 3-month BBSW set.
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JPY: No Reprieve For Embattled Yen
Participants continue to dump the yen, with spot USD/JPY taking out Feb 2, 2016 high (Y121.04) while running as high as to Y121.41. Familiar drivers are in play, with the yen battered by the prospect of widening policy divergence between the BoJ and its DM peers. Hawkish comments from Fed Chair Powell from earlier this week have helped reinforce this expectation.
- The latest upleg comes on the heels of a notable surge which took the pair through the Y120.00 mark and resulted in a brief look above Y121.00. USD/JPY RSI printed its highest levels since 2016, suggesting that the rate is heavily overbought.
- Tuesday's prince action inspired jaw-boning from Japan's Finance Minister, who underscored the importance of stability in FX markets and reminded that resultant benefits to exporters come alongside increased pressure on importers. Neither FinMin Suzuki's comments, nor moderation in crude oil prices prevented the yen from retreating on Tuesday.
- USD/JPY operates at Y121.26 at typing, 46 pips better off, after lodging new cycle highs. The next layer of resistance above is provided by Y121.69, which limited gains on Jan 29, 2016. Conversely, bears keep an eye on Mar 21 low of Y119.04.
- Focus moves to Japan's final machine tool orders (today), flash Jibun Bank PMIs, BoJ Jan MonPol meeting minutes & comments from BoJ's Kataoka (Thursday) as well as Tokyo CPI (Friday).
AUSSIE BONDS: ACGB Nov-31 Auction Prices Well, Cover A Little Low
Market volatility continues to weigh on overall demand at ACGB auctions, with the cover ratio at the latest round of ACGB Nov-31 supply comfortably shy of the 3.00x level, even with the added security blanket of hedgability via XM futures evident. Still, pricing remained firm, with the weighted average yield 0.71bp through prevailing mids (per Yieldbroker). There was no immediate post-auction reaction in ACGB Nov-31, nor in XM futures, with the auction passing smoothly in the grander scheme of things, as the firm pricing offset a slightly disappointing cover ratio.
AUSSIE BONDS: The AOFM sells A$1.0bn of the 1.00% 21 Nov ‘31 Bond, issue #TB163:
The Australian Office of Financial Management (AOFM) sells A$1.0bn of the 1.00% 21 November 2031 Bond, issue #TB163:
- Average Yield: 2.7542% (prev. 1.9267%)
- High Yield: 2.7575% (prev. 1.9275%)
- Bid/Cover: 2.6700x (prev. 3.2250x)
- Amount allotted at highest accepted yield as percentage of amount bid at that yield 17.1% (prev. 83.6%)
- Bidders 35 (prev. 42), successful 14 (prev. 14), allocated in full 9 (prev. 5)
