SOUTH KOREA: Big Falls for Korean Bond Futures Again Today.
Mar-06 02:31
- Korea’s 10YR future is down for the third successive day today.
- Following yesterday’s fall of -0.73, the 10yr is down -0.55 today to be at 118.41.
- Bond markets had been strong from just prior to the BOK meeting on February 25, with the 10YR reaching a high of 120.20 on March 04.
- The move in recent days has trended through the 20-day EMA of 118.66 towards the 50-day EMA of 118.32.
- There are signs that the bullish momentum has diminished as the 20-day EMA’s upward slope has now all but disappeared, a bearish sign.
- Korea’s 3YR future is down also by -0.13 at 106.65 and sits atop the 100-day EMA with the 200-day EMA at 106.56.
- Despite the release of February CPI data suggesting more rate cuts are possible, the move in bonds has been significant, suggesting that some tariff risk was embedded in the bond pricing.
- The KTB curve saw yields as much as 3.5bps higher with the 5YR and 10YR the underperformers. 3YR 2.62% (+2.5bp) 5YR 2.719% (+3.2bp) 10YR 2.817% (+3.3bp)
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JGBS: Cheaper, 10Y Supply & BoJ Ueda In Parliament Are Due
Feb-04 02:16
At the Tokyo lunch break, JGB futures are holding weaker, -20 compared to the settlement levels.
- BoJ's Ueda is scheduled to appear in parliament today.
- Japan’s monetary base fell 2.5 per cent in January from a year ago.
- Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session after yesterday’s modest sell-off following news that President Trump agreed to delay a 25% tariff on Mexico and Canada.
- Cash JGBs are flat to 2bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 1.5bps higher at 1.267% after setting a fresh cycle high of 1.268% ahead of today’s supply.
- The relative affordability of 10-year JGBs compared to futures—measured by the 7- to 10-year spread—remains largely unchanged from last month, having recently rebounded from the lower end of its range over the past year
- Swap rates are 1-3bps higher. Swap spreads are mostly wider.
STIR: BoJ Dated OIS Mostly Softer Than Pre-BoJ Hike Levels
Feb-04 02:06
BoJ-dated OIS pricing is flat to 5bps softer across meetings through October compared to pre-MPM levels.
- Prior to the January 23–24 MPM, market expectations reflected a 98% probability of a 25bp hike, a cumulative 99% chance by March, and more than a full 25bp increase (108%) priced in by May 2025.
- Currently, the probability of another 25bp hike in March stands at 0%, with a full 25bp increase not priced in until December.
Figure 1: BoJ-Dated OIS – Today Vs. Pre-BoJ MPM (January)
Source: MNI – Market News / Bloomberg
JGBS AUCTION: 10-Year JGB Supply Supported By Fresh Cycle Yield High
Feb-04 01:57
This month, the 10-year auction offers an outright yield at a fresh cyclical peak of 1.268%, 10-15bps higher than last month.
- Additionally, the yield curve between 2- and 10-year bonds has steepened slightly compared to the prior month.
- Today’s auction is also likely to be supported by an improvement in sentiment toward global long-end bonds over the past month. For instance, the US 10-year yield is roughly 25bps lower than its early January high.
- The relative affordability of 10-year JGBs versus futures— gauged by the 7- to 10-year spread — sits little changed relative to last month, after bouncing off the lower end of its range over the past year during the month.
- Amid this backdrop, it will be interesting to see if the current 10-year yield generates sufficient demand at today’s auction.
- Results are due at 0435 GMT / 1235 JT.
