SOUTH KOREA: An Unexciting CPI Places No Pressure on the BOK
Apr-01 23:12
- Today’s CPI print likely provides no pressure point for the BOK in their April 17 meeting.
- Whilst the y/y release saw a modest rise to +2.1%, with core at +1.9% this release does not present any new pressures for the voting members to be concerned about.
- The Bank of Korea (BOK) aims to maintain a flexible inflation targeting system, with the goal of keeping headline inflation at 2.0% over the medium term to ensure price stability.
- The broader data provides somewhat of a mixed bag with exports showing some signs of improvement, whilst yesterday’s PMI release was weaker than expected.
- Leading up to the rates decision next week will see Unemployment and early trade data.
- The market has gradually re-priced rate cut expectations with only 8bps of cuts priced in over the next three months and 30 over the next year
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ASIA: Government Bond Issuance Today.
Mar-02 22:58
- Philippines To Sell PHP 7.0Bln 182D Bills (PH0000059248)
- Philippines To Sell PHP 7.0Bln 91D Bills (PH0000058661)
- Philippines To Sell PHP 8.0Bln 364D Bills (PH0000060030)
US TSYS: Tsys Yields Continue To Trend Lower On Strong Data
Mar-02 22:57
- Tsys gained Friday led by front-end yields as Fed swaps priced in additional easing this year beginning as soon as June vs July previously. The curve remained notably steeper on the day, holding a move that gathered pace during US morning. TU closed +05¼ 103-15+, while TY closed +14+ at 111-03
- In tsys options flows, upside protection targeting sub-4% 10yr yield continued, with notable flows including a $3m week 2 play targeting 3.85% and demand for similar hedges in April 10yr options
- Cash tsys yields closed 6.5bps to 4bps lower, short -end outperforming. The 2yr closed -6.2bps at 3.989%, while the 10yr closed -5.2bps at 4.115%. The 2s10s closed +1bps at 21.5bps, while the 2s30s closed +2bps at 49.55, after rising 4bps on Thursday.
- Friday saw Core PCE ease to 2.647% Y/Y from an upward revised 2.865% Y/Y (initial 2.794%) in Dec, as it starts to be helped by more favorable base effects. The Atlanta Fed’s GDPNow for Q1 has been slashed to -1.5% from 2.3% annualized in the Feb 19. Meanwhile, Chicago PMI, increased 6.0pts to 45.5 in February. This is the second consecutive monthly gain, taking the reading to the highest level since June 2024, though it remains in contractionary territory for the fifteenth consecutive month.
- CFTC data for the week ending February 25, show hedge funds aggressively covering their net duration shorts for the third consecutive week, reducing short positions by approximately 188,000 10yr note equivalents across the futures strip. The most significant short covering occurred in ultra-long bond futures ($7.5m/DV01), followed by 2yr note futures ($4m/DV01) and 10yr note futures ($3.3m/DV01). Conversely, asset managers continued to unwind their net long positions, shedding about 117,000 10yr note futures equivalents. Their largest long liquidation was in ultra 10yr note futures ($4m/DV01), with additional unwinding of $6m/DV01 in combined 2yr and 5yr note futures.
- Fed swaps priced in about 25bp of easing by the June FOMC meeting vs 21bp at Thursday’s close, and around 8bp for May vs 7bp previously
AUSSIE 3-YEAR TECHS: (H5) Monitoring Resistance
Mar-02 22:45
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.310/360 High Feb 7 / High Dec 11
- PRICE: 96.240 @ 15:49 GMT Feb 28
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
A medium-term bear cycle in Aussie 3-yr futures remains intact, with Wednesday weakness confirming short-term gains as corrective. On the upside, an extension higher would signal scope for 96.360, the Dec 11 high. Clearance of this level would open 96.730, the Sep 17 ‘24 high. On the downside, a reversal lower from current levels would signal a resumption of the downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low.
