US TSYS: Asia Wrap - Yields End Mixed In A Quiet Session
Aug-01 04:25
The TYU5 range has been 110-29 to 111-00+ during the Asia-Pacific session. It last changed hands at 110-30+, down 0-03 from the previous close.
- The US 2-year yield has shifted lower trading around 3.947%, down 0.01 from its close.
- The US 10-year yield has edged higher trading around 4.376%.
- The 10-year yield has again held the support around its pivot within the wider range 4.10% - 4.65%, decent supply was seen around the 4.30/35% area once more. This would need to clear above the 4.45% area to potentially regain upward momentum now.
- Bob Elliott on X: ”The combination of higher inflation and slowing wage growth is set to put even more of a squeeze on household consumption ahead and with it a weakening broader economy.”
- Nick Timiraos on X: “Core goods inflation is adding around 0.34 pp to core PCE inflation above the average contribution from the decade before the pandemic. Shelter is adding around 0.23 pp above the pre-pandemic trend. Remember, the pre-pandemic trend was below 2%, so not everything needs to go back to the pre-pandemic trend to hit 2%, but the disinflation in services is now being offset by the inflation in goods.”
- Robin Brooks on X: “The tariff inflation impulse to CPI and PCE is clear to see for stuff we import from China: furnishings and recreational goods. Monthly inflation is 100 - 120 bps above where it normally would be around this time of year. That's a massive inflation shock…”
- Data/Events: NFP, S&P Global Man PMI, ISM Manufacturing, Construction Spending, U. of Mich. Sentiment
Fig 1: 10-Year US Yield 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS: Asia Wrap - Yields Drift Higher
Jul-02 04:23
The TYU5 range has been 111-27 to 111-30+ during the Asia-Pacific session. It last changed hands at 111-27, down 0-00+ from the previous close.
- The US 2-year yield has drifted higher trading around 3.776%.
- The US 10-year yield has edged higher trading around 4.25%, up 0.01 from its close.
- The 10-year yield has seen a bounce after a very strong move lower with some paring back of longs ahead of NFP. Any bounce back to the 4.35% area would offer buyers a decent level to add again.
- (Bloomberg) - “Jerome Powell repeated that the Fed probably would have cut rates further this year absent Trump’s expanded use of tariffs, although he didn’t rule out easing at July’s meeting.”
- “The $3.3 trillion US tax and spending bill passed the Senate after JD Vance cast the tie-breaking vote. The House is expected to vote on the package Wednesday, but passage isn’t guaranteed.”(BBG)
- Data/Events: MBA Mortgage Applications, ADP, Challenger Job Cuts
Fig 1: 10-Year US Yield Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
BONDS: NZ-US 10Y Differential In the Top Half Of This Year’s Range
Jul-02 04:12
NZGBs are richer today, with benchmark yields 2bps lower. The NZGB 10-year has slightly outperformed US 10-year since yesterday’s close, with the NZ-US yield differentials 2bps tighter on the day.
- At +25bps, the NZ-US 10-year differential is in the top half of the -20bp to +40bps range seen this year.
- A simple regression analysis of the 3-month forward swap rate spread (1Y3M) over the past 18 months indicates the 10-year yield differential is around 7bps below its estimated fair value of +32bps.
- Notably, the regression error has fluctuated within a range of ±15bps over the past year, highlighting some variability in the relationship.
- The 1Y3M differential continues to be a key driver of market expectations for long-term yield convergence.
Figure 1: NZ-US 10-Year Yield Differential
Source: Bloomberg Finance LP / MNI
CHINA: Bond Futures Strong as OMO Withdraws Liquidity
Jul-02 03:58
- China's bond futures rallied in the morning session as the Central Bank withdrew liquidity during the OMO.
- The 10yr future is up +.10 to 109.08, following on from yesterday's rally. The move sees the 10yr trade above the 20-day EMA of 108.99.
- The 2yr future +0.02 to 102.50 to trade through the 20-day EMA of 102.49 and approach the 50-day EMA of 102.51
- The 10YR government bond is lower in yield by -0.05bps at 1.64%
