US TSYS: Asia Wrap - Yields Slightly Higher In A Quiet Friday Session
The TYZ5 range has been 113-15+ to 113-18 during the Asia-Pacific session. It last changed hands at 113-16, down 0-05 from the previous close.
- The US 2-year yield is trading around 3.542%.
- The US 10-year yield has edged higher trading around 4.03%, up 0.01 from its close.
- 10-Year Yields continued to test lower as inflation data this week proved to hold no smoking gun. The first buy-zone is now back towards the 4.15/4.20% area. Having reached the first target towards the 4.00% zone I expect some supply around this area initially. A sustained break through here and the focus will then turn towards the 3.80% area.
- Mohamed A. El-Erian on X: “With the US CPI numbers matching the consensus forecasts, the main market mover this morning is jobless claims, which came in far higher than expected. The overall signal from this week’s data is clear—and one I’ve stressed for some time, now increasingly echoed by others: inflation may still sit above the Fed’s target, but the greater risk to the economy lies in the pace and severity of labor market weakening.”
- Robin Brooks on X: “It really is starting to look like the tariff inflation shock is over. Categories in the CPI most impacted by China tariffs - like furniture (lhs) and recreational goods (rhs) - saw price spikes peak in June and then fade. August inflation in these categories is near zero…”
- RenMac on X: “Core goods CPI less cars rose just 0.13% in August, or 1.6% SAAR, the weakest pace in several months. This lends support to the notion that tariffs largely are a one-time shock to the price level. Less pressure in August from household furnishings and recreation commodities.”
- Data/Events: U. of Mich. Sentiment
Fig 1: 10-Year US Yield Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JGBS AUCTION: 5-Year Supply Shows Poor Metrics
Today’s 5-year JGB auction showed poor signals on demand. The low price came in below expectations of 99.72, and the bid-to-cover ratio declined to 2.9616x from 3.5411x. Meanwhile the tail widened slightly to 0.03 from 0.02.
- The result aligns with the poor demand signals seen at this month’s 10-year auction.
- With yields higher and the 2s/5s curve steeper than last month, today’s outcome represents a deterioration in overall demand conditions.
- In the aftermath, the 5-year sector is slightly cheaper in afternoon trading.
JGBS AUCTION: 5-Year JGB Auction Results
The Japanese Ministry Of Finance (MoF) sells ¥ 1,842.1bn 5-Year JGBs:
- Average Yield: 1.056% (prev. 0.989%)
- Average Price: 99.74 (prev. 100.05)
- High Yield: 1.062% (prev. 0.993%)
- Low price: 99.71 (prev. 100.03)
- % Allotted At High Yield: 67.7077% (prev. 6.9288%)
- Bid/Cover: 2.9616x (prev. 3.5411x)
FOREX: JPY Crosses - Push Higher As US Stocks Makes New Highs, GBP/JPY Tests 200
US Equities stormed to new all-time highs in the N/Y session as the market gears up for a potential series of rate cuts. This morning US futures have opened pretty muted albeit still at their highs, ESU5 -0.04%, NQU5 +0.03% The JPY crosses remain better bid as risk extends higher, GBP/JPY leads the move eyeing a test of 200.00.
- EUR/JPY - Overnight range 172.08 - 172.86, Asia is trading around 173.00. This pair bounced off its support just below 170.00 and has put a base in now around 170.00. While risk continues to trade positive this will remain bid now on dips.
- GBP/JPY - Overnight 198.13 - 200.08, Asia trades around 199.90. Risk has broken higher again overnight and there has been no sign of a pullback which has seen the pair blow through what should have been decent resistance. A move back above 200.00 could generate fresh impetus higher and dips back towards 198.50 should now find support first up.
- NZD/JPY - Overnight range 87.80 - 88.18, Asia is currently dealing 88.20. The pair found solid demand towards the 86.50 area, I felt sellers should remerge on a bounce back towards 88.50 first up but the price action in the other JPY crosses would make you question a fade for now. A sustained move back above 89.00 would reinstate the momentum higher.
- CNH/JPY - Overnight range 20.5518 - 20.6465, Asia is currently trading around 20.6100. This pair found solid demand back towards its first support area around 2.4000. A sustained break back below 2.3000 is needed to turn momentum lower again, until then dips will probably continue to be supported.
Fig 1 : GBP/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
