AUSSIE BONDS: ACGB Jun-35 Auction Absorbed With More Demand Present
Today’s auction showed solid pricing for ACGBs, with the weighted average yield coming in 0.37bps below prevailing mid-yields, according to Yieldbroker. Moreover, the cover ratio jumped to 3.4444x from 2.75x at the previous auction.
- As noted in our preview, the current yield for this bond was approximately the same as the previous auction, notably about 50bps below the high recorded in early November 2024.
- The 3/10 yield curve was also around the same level as the previous auction but sits around 20bps below its recent high.
- Following the auction, both the cash line and XM remained relatively unchanged.
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MNI: CHINA PBOC CONDUCTS CNY135 BLN VIA 7-DAY REVERSE REPO MON
- CHINA PBOC CONDUCTS CNY135 BLN VIA 7-DAY REVERSE REPO MON
CHINA: Central Bank Injects Liquidity via OMO
- he PBOC issued CNY135bn of 7-day reverse repo at 1.4% during this morning’s operations.
- Today’s maturities CNY43bn
- Net liquidity injected CNY92 bn.
- The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.43%, from Friday’s close of 1.63%.
- The China overnight interbank repo rate is at 1.66%, from the prior close of 1.48%.
- The China 7-day interbank repo rate is at 1.65%, from the prior close of 1.60%.
USD: Opens Heavy On The Downgrade
The BBDXY range Friday night was 1227.14 - 1233.92, Asia is trading around 1229. The USD has opened under pressure in early Asian trading as risk has a knee-jerk reaction lower on the US downgrade.
- “Currency traders are bearish on the US dollar, with strategists at JPMorgan Chase & Co. and Deutsche Bank AG predicting it will continue to weaken.”(BBG)
- “The dollar index is still close to its April lows, and sentiment among options traders is the most negative in five years, with bets on a decline in the dollar over the next year at the highest level since 2020.”(BBG)
- There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows.
- The USD has attempted a bounce to challenge some of those positions on the back of the US-China tariff deal.
- The challenge did not last very long as the weight of supply has seen the BBDXY struggle to maintain any upward momentum.
- The BBDXY needs to hold above 1220 for this challenge to have another leg, a close back below here and the focus will return once more back to the lows.
Data/Events : Atlanta Fed President Raphael Bostic , Dallas Fed President Lorie Logan and Fed Vice Chair Philip Jefferson speak at Amelia Island conference. New York Fed President John Williams speaks at an event organized by the Mortgage Bankers Association.
Fig 1: BBDXY Daily Chart
Source: MNI - Market News/Bloomberg
