AUD: Asia-Pac: AUD/USD Quiet Session, Ignores Bounce In US Stocks
Oct-31 04:19
The AUD/USD has had a range of 0.6547 - 0.6560 in the Asia- Pac session, it is currently trading around 0.6550, -0.10%. The AUD is consolidating around 0.6550, having shrugged off the bounce in US stocks. The AUD failed to extend above the 0.6600 area and has slipped lower as the USD continues its attempt to build a base from which to move higher. The AUD/USD is back within its recent 0.6400-0.6600 range with the pivot being around its current level around 0.6550.
- "AUSTRALIA 3Q PRODUCER PRICES RISE 1.0% Q/Q, AUSTRALIA 3Q PRODUCER PRICES RISE 3.5% Y/Y” - BBG (note there is no forecast for PPI, the Q2 rise was 0.7%q/q)
- “AUSTRALIA SEPT. PRIVATE CREDIT RISES 0.6% M/M; EST. +0.6%, AUSTRALIA SEPT. PRIVATE CREDIT RISES 7.3% Y/Y" - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD 888m). Upcoming Close Strikes : 0.6625(AUD944m Nov 4), 0.6300(AUD600m Nov 4) - BBG
- AUD/JPY - Asia-Pac range 100.67 - 101.03, Asia is trading around 100.80. The pair is consolidating around 101.00 at the moment as it looks to build on its recent move back above 100.00. Suspect dips will continue to be supported for now with the first target 102.50 and then beyond.
Fig 1: AUD/JPY spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US TSYS: Asia Wrap - Yields A Little Lower As Shutdown Begins
Oct-01 04:14
The TYZ5 range has been 112-13 to 112-16+ during the Asia-Pacific session. It last changed hands at 112-16, unchanged from the previous close.
- The US 2-year yield has edged lower trading 3.605%.
- The US 10-year yield is trading around 4.148%.
- 10-Year yields remain subdued below 4.20% as the market prices in a US shutdown, I suspect buyers continue to be around 4.20% initially and look to fade the move higher. The jobs data if released will be key this week and if not then the ADP tonight starts to take on a lot more relevance.
- MNI: Fed’s Logan Cautious On Cuts Given Still-High Inflation. “I will be cautious about further rate cuts,” Logan said. "Even setting aside temporary effects of this year's increases in tariff rates, inflation is not convincingly on track to return all the way to 2%.”
- Brian Sullivan on X: “It can be an uncomfortable thing because so many people and families are worried about their paychecks, but markets tend to go UP in government shutdowns. It's because shutdowns 1) don't involve all of the government and 2) tend to be short and 3) the economy actually tends to keep growing. Weird but true.”
- Data/Events: MBA Mortgage Applications, ADP Employment Change, S&P Global US Manufacturing PMI, ISM Manufacturing, Construction Spending
Fig 1: 10-Year US Yield Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
JGBS: Cash Bonds Little Changed At Lunch
Oct-01 03:13
At the Tokyo lunch break, JGB futures are stronger, +11 compared to settlement levels.
- The Q3 Tankan survey printed in line with expectations and Q2 but FY25 capex intentions increased 1pp to 12.5%. Large company business conditions have been moving sideways at a solid level since the start of last year, especially for the non-manufacturing sector.
- The large manufacturers' index rose 1 point to 14 in Q3 while the outlook for Q4 is forecast to deteriorate 2 points. The series has not been affected by new US tariffs and the 2025 average is slightly higher than 2024's.
- Non-manufacturers' conditions were steady at 34, well above the series average of +7.3, with the outlook at 28.
- Small non-manufacturers are also outperforming manufacturers with the index at 14 (down 1 point) compared to +1 (stable). The outlook for both sectors improved 1 point.
- The September BoJ summary of opinions showed a bias towards a resumption of tightening.
- (Bloomberg) Japan will get its second prime minister in just over a year when the ruling Liberal Democratic Party holds a leadership election on Oct. 4.
- Cash US tsys are slightly mixed, with a steepening bias, in today's Asia-Pac session after yesterday's modest twist-steepener.
- Cash JGBs are little changed across benchmarks.
- Swap rates are flat to 1bp lower, with a steepening bias. Swap spreads are mixed.
AUSSIE BONDS: Holding Cheaper, Market Continues To Price Out RBA Cut
Oct-01 01:48
ACGBs (YM -4.0 & XM -5.5) remain weaker.
- S&P Global PMI Manufacturing Index falls to 51.4 from 53 in Aug.
- Cash US tsys are slightly cheaper in today's Asia-Pac session after yesterday's modest twist-steepener.
- Cash ACGBs are 4-7bps cheaper with the AU-US 10-year yield differential at +22bps.
- The latest ACGB Dec-34 supply achieved a weighted average yield that printed 0.40bp through prevailing mids (per Yieldbroker). However, the cover ratio decreased to 2.1033x, thelowest since its debut in 2023, from 3.1708x.
- The bills strip is -4 to -6 beyond the first contract.
- RBA-dated OIS pricing has firmed modestly across meetings following yesterday’s RBA Policy Decision. Pricing across meetings is 1-4bps firmer than yesterday’s pre-RBA levels. Notably, this post-RBA move leaves pricing some 10-19bps firmer than last Wednesday’s pre-CPI levels.
- A 25bp rate cut in October is given a 35% probability, with a cumulative 11bps of easing priced by year-end.
