AUSSIE BONDS: ACGB Dec-34 Supply Well Absorbed
Expectations of strong pricing at auctions were confirmed, with the latest ACGB Dec-34 supply achieving a weighted average yield that printed 0.45bp through prevailing mids (per Yieldbroker). The cover ratio also improved, rising to 3.7250x from 3.1688x.
- As highlighted in our auction preview, several factors were likely to impact demand. While the current outright yield was similar to the previous auction, the 3/10 yield curve was slightly steeper and at its steepest since December 2021.
- Demand for duration was also likely to be supported by the improvement in sentiment toward longer-dated global bonds, which has strengthened since mid-January despite some deterioration over the past week.
- The ACGB Dec-34 cash line and the XM futures contract are little changed in post-auction dealings.
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AUSSIE BONDS: ACGB June-34 Auction Result
The AOFM sells A$300mn of the 4.25% 21 June 2034 Green Bond:
- Average Yield (%): 4.4294 (Prev. 4.3965)
- High Yield (%): 4.4325 (Prev. 4.3975)
- Bid/Cover: 5.3833x (Prev. 4.5333x)
- Allotted at Highest Accepted Yld as % of Bid at that Yld (%): 12.9 (Prev. 72.7)
- Bidders: 43 (Prev. 28), 17 (Prev. 9) successful, 10 (Prev. 3) allocated in full
FOREX: USD Edges Down, As Safe Havens Underperform Amid Higher US Equity Futures
The USD is weaker in the first part of Monday trade, the BBDXY index ticking down by 0.10% to 1284.85. This leaves the index fairly close to its simple 100-day MA. We are still close to last week's multi month lows at 1282.2.
- JPY and CHF are lagging broader USD softness so far today. Both currencies, particularly yen, outperformed during the risk off US session on Friday. USD/JPY was last little changed close to 149.30. USD/CHF was at 0.8975/80.
- Some medical experts looked to play down fears of a fresh pandemic, after it was reported a new covid like virus that can reportedly transmit from bats to humans weighed on broader risk appetite on Friday (including US equities). So far today US equity futures are +0.35-0.40% firmer.
- AUD and NZD have ticked up, but remain short of recent highs. AUD/USD last near 0.6370, NZD/USD close to 0.5750. Earlier NZ retail sales volumes for Q4 last year printed better than forecast with discretionary spending recovering.
- EUR/USD is up a touch to 1.0475/80 in latest dealings. The German election saw the conservative CDU/CSU win the most votes, which was in line with expectations. Focus now shifts to what type of coalition government will be formed.
- There is little in the way of further data outcomes/event risks in today's Asia Pac session, leaving markets on headline watch. Japan markets are also out today (meaning no US cash Tsy trading). Tsy futures are softer in early dealing today.
CNH: USD/CNH Holding Above 7.2500, Lags Yen Gains
USD/CNH was supported on dips towards 7.2400 post the Asia close on Friday. The pair tracks near 7.2530 in latest dealings, little changed in Monday's session so far. CNH lost 0.27% on Friday as broader USD indices recovered some ground. CNH lagged yen outperformance though, (which rallied amid softer core yields post French and US data misses, along with equity softness). USD/CNY spot finished up at 7.2523, while the CNY CFETS basket tracker fell a further 0.31% to 99.63, per BBG.
- For USD/CNH technicals, we are wedged between the 100-day EMA (near 7.2600), while downside support has been evident near 7.2430, which is the 200-day EMA support level.
- Late on Friday details of the phone call between US Tsy Secretary Bessent and China Vice Premier He Lifeng were reported, with little signs of positive sentiment to come out of the call, with both sides pushing back on respective issues (China on US tariffs and the US on China's imbalances).
- It was reported over the weekend that the US is pushing Mexico to impose tariffs on China imports (to avoid US tariff action on Mexico), see this BBG link.
- Reports of a new covid like virus that can reportedly transmit from bats to humans also weighed on broader risk appetite on Friday (including US equities). There have been no reported human cases so far though (originally reported by SCMP). The Golden Dragon index rose a further 1.65% in US trade though
- Locally the data calendar is empty today. We still await the 1yr MLF outcome, but no change is expected from the current 2% rate. This coming Saturday we get the Feb PMIs.
