AUD: Asia Wrap - AUD/USD Drifts Lower Into US CPI
The AUD/USD has had a range of 0.6497 - 0.6532 in the Asia- Pac session, it is currently trading around 0.6515. The AUD has drifted lower for most of our session as US stocks fail to push on after positive headlines on the conclusion of the US-China talks. Another failure to get back above 0.6550, CPI tonight will determine if it gets tested again.
- AUS Bond Auction: ACGB Nov-32 Auction Goes Smoothly But With Less Demand: Today's auction reflected solid pricing for ACGBs, with the weighted average yield coming in 0.65bps below prevailing mid-yields, according to Yieldbroker.
- The AUD continues to see demand back towards the 0.6500 area, but the inability to break above 0.6550 on multiple occasions will have any bulls a little concerned.
- Price remains in the 0.6350 - 0.6550 range, a sustained break above 0.6550 is needed for the move higher to accelerate. Price looks like it wants to test the top end of the range, tonight's US CPI print will have a say in that.
- Expect buyers to continue to be around on dips while the support in the AUD holds, a close back below 0.6350 is needed to challenge the newly formed uptrend.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6495(AUD400m), 0.6365(AUD550m). Upcoming Close Strikes : 0.6350(AUD 711m June 12), 0.6600(AUD643m June 12)
- CFTC Data shows Asset managers maintaining their shorts, the Leveraged community though continued to add to their shorts again.
AUD/JPY - Today's range 94.20 - 94.75, it is trading currently around 94.35. Price broke the multiple tops around the 94.00 area over NFP’s. It has since managed to hold these gains, while this continues focus will turn to the high towards 96.00. Support should now be back towards the 93.00/50 area.
Fig 1: AUD/USD spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US TSYS: Asia Wrap - Yields Extend Higher
TYM5 has traded lower within a range of 110-15+ to 110-19+during the Asia-Pacific session. It last changed hands at 110-19, down 0-07 from the previous close.
- The US 2-year yield is higher, dealing around 3.91%, up 0.02 from its close.
- The US 10-year yield is higher, dealing around 4.40%, up 0.02 from its close.
- (Bloomberg) -- “Hedge funds aggressively added to net short positioning in 10-year note futures, while asset managers boosted longs in the sector in the week up to May 6, CFTC data shows.”
- Several regional small and medium-sized banks in China have lowered deposit interest rates in a bid to further reduce funding costs, according to Securities Daily. Following the adjustment, interest rates on certain banks’ three- and five-year medium- to long-term deposits have fallen below 2%. Analysts anticipate this downward trend will persist, citing ongoing pressure from narrowing interest rate spreads, the report said.
- Yields have all moved higher this morning as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland.
- The 10-year Yield range seems to be 4.10% - 4.5%, price has bounced nicely off the 4.25/30 support, target back towards the top end of the range 4.45/50%.
- Data/Events : US CPI Tomorrow
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JGBS: Bear-Steepener, Trade Deals In Focus
At the Tokyo lunch break, JGB futures are weaker, -43 compared to the settlement levels, hovering just session lows.
- Outside of the previously outlined trade balance data, there hasn't been much by way of domestic drivers to flag.
- Today’s heavy session aligns with US tsys, which are trading 2-3bps cheaper in today's Asia-Pac session as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland. US Treasury Secretary Bessent said there had been 'substantial progress' in the two days of talks with China and that further details would be shared today.
- “Japan won’t accept any initial trade agreement with the US that excludes auto tariffs, according to Prime Minister Shigeru Ishiba. Ishiba on Monday made his stance clear when asked in parliament about the possibility that Washington might urge Tokyo to strike a provisional agreement that doesn’t address US tariffs on car imports.” (per BBG)
- Cash JGBs are 2-8bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 4bps higher at 1.409% versus the cycle high of 1.596%.
- Swap rates are 2-6bps higher, with swap spreads mixed.
