US TSYS: Asia Wrap - Yields Edge A Little Higher In The Front-End
The TYU5 range has been 111-21 to 111-26 during the Asia-Pacific session. It last changed hands at 111-23+, down 0-01 from the previous close.
- The US 2-year yield has edged higher trading around 3.752%, up 0.01 from its close.
- The US 10-year yield has edged higher trading around 4.308%.
- Yields are still firmly within its wider 4.10%-4.65% range. The 4.35% pivot area in 10-Year yields found solid demand overnight helped by the S&P rating, the market will now be waiting for any clues from Powell's upcoming Jackson Hole speech.
- “TRUMP: EVERY SIGN IS POINTING TO A MAJOR RATE CUT" - BBG
- "Could somebody please inform Jerome “Too Late” Powell that he is hurting the Housing Industry, very badly? People can’t get a mortgage because of him. There is no Inflation, and every sign is pointing to a major Rate Cut. “Too Late” is a disaster!" - (Trump Truth Social Post)
- (Bloomberg) - It’s not the first time that when monetary policy is tweaked in New Zealand, there’s a read across for G-10 peers, especially Treasuries. The RBNZ lowered interest rates as expected, but surprised traders by implying deeper cuts into next year. The resulting yield curve steepening is likely to be replicated by fixed income peers where central banks have an easing bias.
- Data/Events: MBA Mortgage Applications, FOMC Meeting Minutes
Fig 1: 10-Year US Yield 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUD: AUD/USD - Consolidating Above 0.6500
The AUD/USD has had a range of 0.6498 - 0.6520 in the Asia- Pac session, it is currently trading around 0.6510, +0.02%. The pair found decent supply back towards 0.6550 again on Friday. The follow through below 0.6500 is quite disappointing for AUD shorts but with Stocks making new highs and risk outperforming, it makes it a hard environment for AUD/USD to collapse in. The Pair looks to be consolidating in a 0.6450 - 0.6600 range as the market awaits a catalyst to provide clearer direction.
- The focus this week is likely to be on the RBA with the July meeting minutes published on Tuesday and Governor Bullock speaking at the Anika Foundation lunch on Thursday. Both will be monitored for further information on what lay behind the unexpected decision to hold and central bank thinking following the disappointing June jobs data.
- China Daily - “reports that it is a 'strategic necessity' for the scaling back of holdings in US Treasuries, given the declining confidence in the dollar as the reserve global currency.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD729m), 0.6500(AUD821m) . Upcoming Close Strikes : 0.6650(AUD495m July 24) - BBG
- CFTC Data shows Asset managers have maintained their shorts -38267, the Leveraged community added slightly to their shorts to -20048.
- AUD/JPY - Today's range 96.32 - 96.75, it is trading currently around 96.65, -0.20%. The pair strangely gapped lower on the open in reaction to the Japanese election result, it found good demand back towards the breakout area around 96.00, and this will need to hold to build a platform from which to probe higher again. The positive risk backdrop should provide tailwinds. CFTC Data shows a clear turning now as Asset managers reduced their shorts and Leveraged accounts actually began to build JPY shorts.
Fig 1: AUD CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
CHINA: Bond Futures Follow on from Friday's Selloff
- Bond futures are down in the morning session, following on from Friday's falls.
- The 10yr is lower by -0.10 at 108.71 and sits just above the 200-day EMA of 108.70. It has not traded below the 200-day EMA since last May.
- China's 2yr bond future is lower by -0.02 at 102.40 to remain below all major moving averages. The nearest (above) being the 20-day EMA of 102.44.
- The 10YR CGB has drifted higher in yield by +1bp in this morning's trade to reach 1.67%
US TSYS: TYU5 Up Slightly On The Day
The TYU5 range has been 110-24 to 110-28 during the Asia-Pacific session. It last changed hands at 110-26, up 0-01 from the previous close.
- No Cash market today
- The 10-year yield broke above 4.45% in response to the CPI Data, this implies price is likely to turn its focus back to 4.65% and could see further paring back of longs. Support is now back towards the 4.35/40% area which has been the pivot in the larger 4.10% - 4.65% range.
- Daily Chartbook on X: “On Wednesday, "the US Treasury reported the largest inflow of foreign capital to that market (net purchases) since 2022, obliterating the narrative that foreign investors are fleeing Treasuries (or US equities) due to political risks.”@bespokeinvest
- “China Daily reports that it is a 'strategic necessity' for the scaling back of holdings in US Treasuries, given the declining confidence in the dollar as the reserve global currency.” - BBG
- (Bloomberg) -- “EU envoys will meet as early as this week to draft a retaliatory plan in response to a possible no-deal scenario with Donald Trump. The move follows a hardened stance from the US trade team ahead of the Aug. 1 deadline.”
Data/Events: Leading Index
Fig 1: 10-Year US Yield Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
