ASIA FX: Authorities Ramp Up Yuan Rhetoric But USD/CNH Dips Supported
There were lots support points around the yuan today. Onshore media stated the PBoC would keep the currency basically stable and has a number of tools to deal with depreciation. The CNY fixing bias remained firmly against depreciation pressures, while it was reported that bill issuance in Hong Kong will step up in January. USD/CNH saw lows of 7.3463, against earlier highs of 7.3647, but has been support on dips. We were last 7.3575, little changed for the session.
- The Caixin services PMI beat expectations, and while all of the PMIs are above the 50.0 expansion/contraction point, there was little positive follow through to the yuan or China equities. Spot USD/CNY is close to 7.3300, which isn't too far off the upper daily trading limit (+2% above today's fixing level of 7.1876).
- Spot USD/KRW has been range bound, last near 1470. Earlier Dec FX reserves were steady. North Korean launched a ballistic missile to coincide with US Secretary of State Blinken's visit to South Korea, but asset market sentiment remained steady. South Korean stocks are higher, up nearly 2%, amid broader tech gains. This isn't aiding the won though.
- Spot USD/TWD is little changed, last near 32.90. Early highs came in at 32.95, levels last seen in 2016.
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Our latest Employment Insight has just been published and emailed to subscribers.
