JGBS: Belly Leads Rally, Tokyo CPI Firmer, Jobless Rate In-Line
In Tokyo morning trade, JGB futures are stronger, +16 compared to settlement levels.
- May Tokyo CPI saw core measures print firmer than expected. Headline rose 3.4% y/y, in line with consensus estimates, which was also the prior outcome (revised down from 3.5% originally reported). The ex-fresh food measure rose 3.6%y/y (3.5% was the forecast and 3.4% prior). Ex-fresh food and energy was 3.3%y/y, against a 3.2% forecast and a 3.1% April print.
- Japan's April jobless rate printed at 2.5%, in line with the consensus and the March outcome. It was the same story for the job-to-applicant ratio, which came in at 1.26. The jobless rate is still close to recent cycle lows and suggesting a tight labour market. The job-to-applicant ratio is well off late 2022 highs, but is not showing trend weakness either.
- (Bloomberg) - BoJ Governor Ueda says he wants to incorporate various inputs from market participants into the bank’s June review of its government bond purchases.
- Cash US tsys are slightly richer in today’s Asia-Pac session after yesterday’s gains.
- Cash JGBs are flat to 3bps richer across benchmarks, with the belly leading. The benchmark 2-year yield is 0.9bps lower at 0.749% ahead of today’s supply.
- Swap rates are 1-6bps higher, with the curve steeper. Swap spreads are wider.
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CHINA: Official PMI Slips into Contraction
- As anticipated following the release of the EPMI Index, China’s official PMI manufacturing slipped into contraction in April.
- Following March’s result of +50.5 April fell to +49.0, below expectations of +49.7.
- The Non-Manufacturing PMI slipped to +50.4 from +50.8 last month
- These are the first PMI readings since the trade war kicked off with the imposition of 145% tariffs on Chinese goods to the US and as shipments to the US crater the official forecast of 5% growth now looks challenging.
- Authorities have announced measures to support exporters with access to loans and continues to seek ways of boosting the domestic economy.
- However today’s result seems likely a taste of things to come as the trade war impacts not just China corporates, but the region as a whole.
AUSTRALIA DATA: A$ Bounces, Firmer OIS, Post Stronger Inflation Figures
Australian Q1 CPI and the March monthly print were above forecasts, more details to follow. The AUD/USD has risen post the print, last tracking above 0.6400, were were sub 0.6390 prior to the print. Tuesday highs at 0.6450 will be an upside target. On the bond side, futures are ym -4 xm -2, while OIS is 1-8bps higher across RBA meeting dates.
AUSTRALIA DATA: Higher Q1 Inflation Print But Below Top Of Band
Q1 trimmed mean CPI printed 0.1pp higher than expected at 0.7% q/q to be up 2.9% y/y, down from the upwardly revised Q4 at 0.6% q/q & 3.3% y/y. Headline rose 0.9% q/q & 2.4% y/y, in line with Q4’s annual rate. March was higher than forecast at 2.4% y/y unchanged from February. More details to follow. See ABS press release here.
