US TSYS: Asia Wrap - Yields Mixed, Long-End Edges Higher
The TYU5 range has been 112-03+ to 112-07 during the Asia-Pacific session. It last changed hands at 112-04, down 0-03+ from the previous close.
- The US 2-year yield is trading around 3.712%.
- The US 10-year yield has edged higher trading around 4.246%, up 0.02 from its close.
- The 10-year yield had a powerful move lower in reaction to the NFP data, breaking below its 4.30% pivot within the wider range 4.10% - 4.65%. This now turns momentum lower in yields and you could expect buyers of treasuries on bounces back towards 4.30/35% now looking to initially test the 4.10% area.
- Mohamed El-Erian on LinkedIn: “The views of some FOMC members appear to be shifting to align with the position taken by the two dissenters, Governors Bowman and Waller, at last week's policy meeting. The massive revisions to the jobs data are, of course, the catalyst for this change. However, there's another noteworthy aspect: We're once again witnessing the limitations of this Federal Reserve's excessive data dependency, which has left it with virtually no strategic vision -- something that also contributed to the big 2021-22 ("transitory inflation") policy mistake.”
- Alexander Stahel on X: ”Think about this “Black Swan” again. The downward revisions to May and June payrolls in the July jobs report constitute a black swan event — a three-standard-deviation move with less than a 0.2% chance of occurrence in the last 30 years. 50bps cut is coming."
Data/Events: Initial Jobless Claims, Wholesale Inventories, NY Fed 1-Yr Inflation Expectations, Consumer Credit
Fig 1: 10-Year US Yield 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
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CHINA: Bond Futures Lower as Equities Rally
- China's major bond futures were all lower today in the morning session as equities rallied strongly across major bourses.
- The 10yr is down -0.07 at 109.03 and is approaching the 20-day EMA of 109.02.
source: Bloomberg Finance LP / MNI
- The 2yr bond future is down -0.02 at 102.47 and has moved below the 20-day EMA of 102.49.
- Government bonds are remain stable with the 10yr at 1.64%
STIR: RBA Dated OIS Firmer Ahead Of RBA Decision
RBA-dated OIS pricing is firmer on the day across meetings ahead of today’s RBA Policy Decision.
- A 25bp rate cut this week is given a 91% probability, with a cumulative 75bps of easing priced by year-end (based on an effective cash rate of 3.84%).
Figure 1: RBA-Dated OIS – Current Vs. Prior
Source: Bloomberg Finance LP / MNI
JGBS AUCTION: 5-Year Supply Shows Mixed Metrics
Today’s 5-year JGB auction showed mixed signals on demand. The low price came in line with expectations at 100.03, but the bid-to-cover ratio declined to 3.5411x from 4.5783x—albeit the highest since 2023. Meanwhile, the tail narrowed slightly to 0.02 from 0.05, pointing to improved bidding interest.
- The result aligns with the mixed demand signals seen at this month’s 10-year auction. With yields and the 2s/5s curve broadly unchanged from last month, today’s outcome represents a modest deterioration in overall demand conditions.
- In the aftermath, the 5-year sector is little changed in afternoon trading.
