BOJ: BoJ Makes Rinban Purchase Offers
The BoJ offers to buy a total of Y1.0tn of JGBs from the market:
- Y475bn worth of JGBs with 1-3 Years until maturity
- Y475bn worth of JGBs with 3-5 Years until maturity
- Y50bn worth of JGBs with 25+ Years until maturity
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AUSSIE BONDS: 3-Month BBSW Fix Jumps, Bond Futures Just Off Worst Levels
YM & XM operate a touch above their respective fresh cycle troughs, with bear flattening still in play as the former prints 8.5 ticks below settlement levels while the latter is 6.5bp cheaper on the day. There has been some focus on BBG headlines surrounding Goldman Sachs’ RBA call change (which includes back-to back 50bp hikes in June and July, with a move to 2.60% by the end of the year), although this was just a rehash of the bank’s note that was issued early in the London afternoon on Tuesday. Elsewhere, 3-month BBSW set 16.8bp higher today, helping apply some fresh pressure to the bill strip, with those contracts sitting 7-10 ticks lower through the reds.
HONG KONG: Another Challenging Time For HKD?
- USDHKD has been rising sharply since the start of the year, with the pair currently trading slightly below the high of its range band at 7.85 (chart below).
- The last time the pair tested the upper band was in 2018/2019 as HK protests in addition to the Sino-US trade spat spurred capital flight and increased pressure on HKMA to maintain the ‘peg’.
- This time, pressure has stemmed from the strong divergence in monetary policy between Hong Kong and the US.
- HK generally has to mirror Fed policy in order to ease the pressure on the USDHKD ‘peg’.
- In addition, economic data showed this morning that economic growth contracted significantly more than expected in Q1 by 4% YoY (vs. -1.3% exp.), down from +4.8% in Q4 2021, as ‘Zero-Covid’ policy has been strongly weighing on growth expectations (for both Hong Kong and mainland China).
- Strong support for the USD has also been constantly on the rise this year amid ‘hawkish’ Fed tone and surging geopolitical uncertainty.
- Will the HKMA be able to preserve the 'USDHKD' and keep a loose policy to stimulate the economy?
Source: Bloomberg/MNI.
GLOBAL: Global Inflation Reaches New High of 6.5%
Executive Summary:
- Inflationary pressures continue to remain elevated in most of the developed and emerging market economies, mostly driven by the surge in energy and food prices following the Ukraine war shock.
- Our global inflation gauge rose to a new high of 6.5% in March (based on the inflation rate of 70 DM and EM countries) after breaking above its 5.3% peak reached just before the 2008 Global Financial Crisis last month.
- Interestingly, inflationary pressures have also started to accelerate again in Asia/SE Asia (inflation has remained low or has been easing in most of the Asian economies until recently).
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Source: Bloomberg/MNI.
