US TSYS: Asia Wrap - Futures Edge Higher With No Cash Market

The AUD/USD has had a range of 0.6454 - 0.6480 in the Asia- Pac session, it is currently trading around 0.6460. The AUD tried lower on the GDP missing lower, but the bids that were around overnight again provided support towards the 0.6450 area. 

• AUSTRALIA DATA: GDP Details Signal Gradual Recovery Still In Place. While Q1 GDP was weaker than expected and slower than Q4, it was impacted by extreme weather events in the quarter which impacted exports and domestic demand. Thus there is likely to be some positive payback in Q2 and so a reaction by the RBA to the weakness at its July 8 decision is not assured. Given special factors, it is likely to watch the more timely monthly data closely for signs of a Q2 recovery..
• The AUD is basically back to where it started the day, we may have to wait for NFP on Friday to get some clearer direction.
• Price is back in the 0.6350 - 0.6550 range, a sustained break above 0.6550 is needed for the move higher to accelerate. The dips look to be well supported while above 0.6350.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6450(AUD625m), 0.6455(AUD449m). Upcoming Close Strikes : 0.6300(AUD 1.47b June 6)

• AUD/JPY - Today's range 92.83 - 93.17, it is trading currently around 93.000. Range looks 92.00 - 94.00 for now, a sustained break sub 91.50/92.00 will bring focus back to towards the lows again.

  Fig 1: AUD/USD spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

Zerohedge wrote an article highlighting the recent increase in Treasury buybacks and asks is this Scott Bessent stepping in ? https://www.zerohedge.com/markets/its-treasury-vs-fed-fed-sidelined-bessent-unleashes-record-10-billion-bond-buyback

• “Scott Besent revealed that he has breakfast with Powell every week, and also said that if the Fed does nothing, he might take matters in his own hands, and since the Treasury has a "big toolkit" one of the things it could do is "up the Treasury buybacks"
• “Six weeks later, with the Fed sidelined and unwilling to do anything to ease the plight of US treasuries which continue to trade at dangerous levels - the 30Y is flirting with a 5% level - it appears this is what Bessent has done.”
• “At 2pm on Tuesday afternoon, the Treasury announced the results of its latest Treasury buyback operation. While the operation itself was not remarkable - the Treasury had been holding these more or less weekly since April 2024 - the size of it was: at $10 billion, this was the largest Treasury buyback operation in history.”
• “And while the maturity range of the cusips accepted for buyback was of low duration, in the interval between July 15, 2025 and May 31, 2027, we are about to see sizable increases in the total buyback size of longer duration treasuries.”
• “Sure enough, tomorrow at 2pm, the Treasury will complete a buyback focusing on Treasuries maturing in the 2036-2045 interval, i.e., 10-20 year paper, and the maximum amount to be redeemed will be $2 billion, up 100% from the last such buyback on May 6, when the maximum amount to be redeemed was $1 billion.”

• “In fact, the last time there was a treasury buyback anywhere close to today's amount was in mid/late April when Treasuries were tumbling and when someone had to step in and cushion their fall.”

  Fig 1 : Treasury Debt Buyback

  

  Source: Zerohedge

The TYU5 range has been 110-15 to 110-18+ during the Asia-Pacific session. It last changed hands at 110-17, up 0-02 from the previous close.

• The US 2-year yield is unchanged, dealing around 3.947%.
• The US 10-year yield has edged lower, trading around 4.446%, down 0.1 from its close.
• Jens Nordvig on X: “It is rare for the Fed to set rates at a level similar to nominal GDP growth. Normally, there is a large gap, with nominal policy rates well below nominal growth. The last times we were here were in the early 2000s and around 2006-2007. Something to think about.”(Graph Below)
• MNI US: Senate GOP Conference To Meet Weds To Discuss Accelerated Megabill Schedule: Laura Weiss at Punchbowl News reports on X that Senate Republicans will hold an all-conference meeting to discuss the 'One Big Beautiful' reconciliation bill on Wednesday afternoon.
• The 10-year yield continues to find good support around 4.35/40%. Yields need to hold above this area to continue to build for a move higher.

• Data/Events: ADP, S&P Services PMI, ISM Services Index, Fed Beige Book

  Fig 1: Fed Funds Effective rate vs Nominal GDP Growth

  

  Source - Jens Nordvig/Bloomberg