US TSYS: Asia Wrap - Yields Give Back Some Overnight Gains
May-22 04:07
TYM5 has traded higher within a range of 109-13 to 109-19 during the Asia-Pacific session. It last changed hands at 109-18, up 0-02 from the previous close.
- The US 2-year yield has drifted lower, dealing around 4.001%, down 0.02 from its close.
- The US 10-year yield has drifted lower, dealing around 4.5825%, down 0.02 from its close.
- Bloomberg - “Investors are pushing back against President Donald Trump's tax-cut plan, driving yields on benchmark 30-year Treasuries to as high as 5.1% and sparking declines in stocks and the dollar.”
- “The concern is that the tax bill would add trillions of dollars to already bulging budget deficits, which could lead to a surge in borrowing costs and make it difficult for the US to address its fiscal deterioration.”
- “US HOUSE REPUBLICANS SET PRE-DAWN THURSDAY VOTES FOR SWEEPING TRUMP TAX BILL AFTER MARATHON NEGOTIATIONS - [RTRS]"
- “Trump said he’s “giving very serious consideration” to taking Freddie Mac and Fannie Mae public after more than a decade of being under government oversight.”(BBG)
- The 10-year found sellers again going into the 20-Year auction overnight and then extended after weak demand. Should yields hold this break we will then target the 4.75% area. Support seen back towards 4.45%, dips look likely to continue to see supply in the short-term.
- Data/Events :Chicago Fed Activity Index, Initial Jobless Claims, S&P PMI’s, Existing home Sales, Kansas City Fed Manu. Activity
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GOLD: Close To $3500, Moving In Line With USD Weakness
Apr-22 04:02
Gold is fast approaching the $3500 level. Session highs rest at $3494.8, while we were last near $3486/87, still up 1.8% for the session so far. Monday's gain for bullion was 2.92%.
- Gold is moving in lockstep with USD weakness, the chart below shows bullion plotted against the BBDXY index, which is inverted on the chart.
- The inability of the USD to sustain the earlier modest rebound has likely only added to gold's current bullish momentum. The USD remains firmly under pressure, with continued unwinding of US exceptionalism in focus.
- As we noted earlier, the RSI (14) on gold is comfortably into overbought territory, not at 79.6, but we are still under 2024 extremes for this metric.
Fig 1: Gold Spot Price & USD BBDXY Index (Inverse)
Source: MNI - Market News/Bloomberg
JGBS: Weaker & At Session Lows At Lunch
Apr-22 03:27
At the Tokyo lunch break, JGB futures are sharply weaker and at session lows, -41 compared to the settlement levels.
- "Bank of Japan officials see no need to change their stance on gradually raising interest rates despite US tariffs, as they wait for more data to analyse the impact. The BOJ is likely to hold its policy settings steady at its May 1 meeting and may cut its price forecast due to a stronger yen, cheaper oil, and economic weakness." (per BBG)
- “The impact of Donald Trump’s tariff campaign has already filtered through to Japanese companies, with about 10% saying the measures have affected their businesses and more voicing concern on the future jolt, according to a MoF survey.” (per BBG)
- Cash US tsys are slightly cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's long-end sell-off.
- Cash JGBs are 1- 5 bps cheaper across benchmarks, with the belly leading. The benchmark 10-year yield is 4.5bps higher at 1.330% versus the cycle high of 1.596%.
- Swap rates are 2-6 bps higher. Swap spreads are mixed.
- Today, the local calendar will be empty apart from an Enhanced Liquidity Auction for 15.5-39-year JGBs.
FOREX: Early USD Gains Not Sustained, USD/JPY Close To 140.00 Test
Apr-22 03:14
Earlier USD gains haven't been sustained, with the G10 currencies supported on dips so far today versus the USD. The BBDXY index was last near 1214, down around 0.15% for the session, but still above intra-session lows from Monday (near 1212).
- There hasn't bene an obvious catalyst for this turnaround in USD sentiment since this morning. US equity futures are still positive, albeit off earlier highs. Regional equity sentiment is mixed, but outperforming Monday's cash US falls (so hinting at further US asset market underperformance). US Tsy yields are little changed in latest dealings.
- Yen is the strongest performing G10 currency, with USD/JPY finding selling interest above 141.00. We track near 140.15/20 now, up 0.50% in yen terms. This is fresh lows in the pair back to September last year. Sep 16 lows from that period were at 139.58.
- EUR/USD is back up to 1.1535/40, just short of recent highs (1.1573). USD/CHF is back under 0.8100 but little changed for the session.
- AUD/USD is near 0.6430/35, eyeing Monday highs close to 0.6440, while NZD/USD is up to 0.6015/20.
