BOJ: BoJ Makes Rinban Purchase Offers

The feedthrough from Friday’s move lower in U.S. equities is being bolstered by uncertainty surrounding broader policy settings in the UK, resulting in generally heavy trade for Asia-Pac cash equities and the major global equity index futures. The NASDAQ leads the weakness in e-minis, trading ~1.2% softer on the day at typing.

• Note that the 3 major e-mini contracts have registered fresh cyclical lows, with the S&P 500 e-mini now comfortably below 3,600. The next level of meaningful technical support for that contract is seen at the 1.382 projection of the Aug 16-Sep 7-Sep 13 price swing (3,558.97). Below there, further projections of that price swing (3,506.38 & 3,453.78) are noted.

Market pricing surrounding the RBA terminal rate has shifted higher again in recent weeks’ although the June peak of ~4.50% has not been breached. While domestic economic resilience and RBA worry re: inflation is part of the story, the shift higher in terminal rate pricing surrounding the U.S. Federal Reserve, coupled with the universal support for the “higher for longer” thought process within the Fed, as well as the recent BoE terminal rate repricing, primarily driven by UK fiscal matters, have played just as much, if not more, of a part. This adds credence to our assumption that the RBA will not be willing to step down the pace of tightening at its October meeting.

Fig.1: The Recent Evolution Of RBA Dated OIS Pricing

Source: MNI - Market News/Bloomberg