BONDS: Core FI Lose Allure As Sentiment Recovers
Recovery in broader risk appetite pulled the rug from under core FI as the PBOC pledged a more proactive approach to supporting domestic economy via monetary policy tools.
- T-Notes reversed earlier gains and sank into negative territory. TYM2 last changes hands -0-09+ at 119-10, pulling back from its earlier session high of 119-26+. Eurodollar futures deal 0.5-5.5 ticks lower through the reds. Cash U.S. Tsy yields bounced in the Tokyo afternoon and last sit 1.9bp-4.0bp higher, with the curve running a tad flatter. Looking ahead, durable goods orders, Conf. Board Consumer Confidence & new home sales provide local data highlights on Tuesday, with 2-Year Tsy auction also up today.
- JGB futures dipped as the BoJ conducted its regular Rinban operations and the final iteration of pre-announced fixed-rate JGB purchases. The contract extended losses after the Tokyo lunch break and last operates at 149.26, a tick shy of previous settlement. Cash JGB yields recovered towards neutral levels, albeit 30s still outperform. Japan's unemployment rate unexpectedly slipped in March, but the data is unlikely to move the needle on Thursday's BoJ policy meet. Re: today's Rinban ops, they yielded the following offer/cover ratios:
- 3- to 5-Year: 1.80x (prev. 2.32x)
- 5- to 10-Year: 2.71x (prev. 2.40x)
- 25+ Year: 5.20x (prev. 4.73x)
- 10-Year JGBis: 4.63x (prev. 2.08)
- Aussie bond futures sold off late doors in tandem with major peers, YM last +5.0 & XM +10.0 (both near session lows). Bills run -1 to +9 ticks through the reds. Cash ACGBs caught a bid as Sydney trading resumed after the ANZAC Day, but trimmed gains later in the day. Yields sit 0.8bp-4.2bp at typing, curve runs steeper as the short-end leads gains. Domestic headline flow was sparse, with all eyes already on the quarterly CPI report, due for release on Wednesday.
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USDCAD TECHS: Eyeing Key Support
- RES 4: 1.2924 High Dec 22
- RES 3: 1.2871/2901 High Mar 15 / High Mar 8 and a key resistance
- RES 2: 1.2778 High Mar 16
- RES 1: 1.2669 20-day EMA
- PRICE: 1.2500 @ 16:35 GMT Mar 25
- SUP 1: 1.2498/99 Low Mar 25 / Jan 21
- SUP 2: 1.2475 2.0% Lower Bollinger Band
- SUP 3: 1.2454 Low Jan 19 and a key support
- SUP 4: 1.2387 Low Nov 10 2021
USDCAD traded to a new cycle low Friday. This week’s move lower and most recently, a break of 1.2552, the 76.4% retracement of the Jan 19 - Feb 24 rally, reinforces a bearish theme and signals scope for an extension lower. The focus is on the Jan 21 low of 1.2499 and 1.2451, the Jan 19 low. On the upside, initial firm resistance is seen at 1.2669, the 20-day EMA. A break of this average would ease current bearish pressure.
US: Public Opinion Of US Leaders Remains Low
The daily favourability ratings of US political leaders continues to reflect a mistrust of politicians amongst voters.
- the Real Clear Politics favourability rating also provides some context to President Biden's low approval rating. Both Republican and Democrat leaders continue to have low approval.
- Senate Minority Leader Mitch McConnell has the lowest rating with -34 approval. This reflects his association with the GOP establishment opposed by former president Donald Trump.
- Trump is the political 'leader' with the highest favourability with -6.1 but he is only marginally ahead of President Biden who sits at -9.2.
Favourability Ratings: US political Leaders Real Clear Politics
AUDUSD TECHS: Fresh YTD High
- RES 4: 0.7599 High Jul 6 2021
- RES 3: 0.7556 High Oct 28 and a key resistance
- RES 2: 0.7537 High Mar 25
- RES 1: 0.7533 2.0% 10-dma envelope
- PRICE: 0.7506 @ 16:33 GMT Mar 25
- SUP 1: 0.7450/7376 Low Mar 23 / Low Mar 22
- SUP 2: 0.7343 20-day EMA
- SUP 3: 0.7271 50-day EMA
- SUP 4: 0.7165 Low Mar 15 and a key support
AUDUSD strengthened further early Friday and continues to deliver new YTD and multi-month highs. This week’s important technical break has been the move above 0.7441, the Mar 7 high, marking an extension of the strong reversal from 0.7165, Mar 15 low. This reinforces the current bull cycle that started Jan 28. The break of 0.7441 signals scope for a climb towards 0.7556, the Oct 28 high. Initial firm support is seen at 0.7376.
