JAPAN: BOJ Meeting Takes Centre-Stage
Jul-27 18:21
- The most recent Nikkei report and the associated moves for the JPY place the overnight BOJ meeting/decision as considerably more significant. We noted earlier that overnight USDJPY vols had surged sharply as the contract begins to capture the Friday BoJ; adding close to 30 points to hit the highest level since the March and January BoJ meetings, both of which were preceded by fraught speculation of a YCC tweak, contrasting with very little sell-side expectations of such a move.
- As we noted in our markets team preview, recent statements from BoJ Governor Ueda indicate that the Bank has no intention of altering its monetary policy settings as long as they remain convinced that achieving a sustainable and stable +2% inflation is still a distant prospect.
- Furthermore, Governor Ueda's perception of bond market functioning has remained largely unchanged since the policy meetings in April and June. This is noteworthy because improved bond market functioning was cited as a crucial factor in the decision not to make any policy alterations during those meetings.
- The MNI policy team had also referenced that the meeting is likely to see discussion on allowing more movement around its 0% 10-year-yield target or widening its 100bp trading band, but there is no consensus for such a move among the Board’s nine members. Dissenting votes will be closely monitored.
- The link to the full MNI preview is here: https://roar-assets-auto.rbl.ms/files/54914/BOJ%20...
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PIPELINE: $2.5B Credit Agricole 3Pt Launched
Jun-27 18:21
- Date $MM Issuer (Priced *, Launch #)
- 06/27 $3B *IADB 3Y SOFR+24
- 06/27 $2.5B #Credit Agricole $1.25B 3Y +120, $500M 3Y SOFR+129, $750M 10Y +175
- 06/27 $2.25B *British Columbia 10Y SOFR+70
- 06/27 $2.25B #Rep of Chile $1.15B +12Y +123, $1.1B +30Y +148
- 06/27 $500M *Korea Gas 5Y +88
- 06/27 $500M #Mitsubishi 5Y +100
EURJPY: EURJPY Rallies 0.85%, Extends Impressive Run Higher
Jun-27 18:16
- Broad single currency strength and a late selloff for the Japanese Yen (bolstered by the turnaround for front-end US yields) has resulted in EURJPY posting a 0.85% advance on Tuesday as we approach the APAC crossover, extending its impressive run higher throughout the second half of June.
- Despite the pair oscillating either side of 150 in late May and early June, the sharp rally across the last eleven trading sessions equates to around a +5.2% surge, as it eats into the sharp decline witnessed in 2008.
- On the Euro side, today’s strength comes alongside ECB terminal pricing reclaiming the 4.00% handle. Between strong US data, hawkish-leaning ECB comments from Sintra (including an MNI interview with a typically hawkish Wunsch), and anticipation of June inflation readings starting tomorrow with Italy.
- For EURJPY, price action reinforces the current technical bullish theme after recently clearing key resistance at 151.61, the May 2 high and an important bull trigger. Moving average studies are in a bull mode position too, highlighting positive market sentiment and the topside focus is on 158.72, a Fibonacci projection.
- The market has heard low level verbal warnings thus far from relevant officials regarding potential intervention, with any developments in this space likely to garner growing attention.
- Yesterday, Japanese Chief Cabinet Secretary Matsuno, stressed that "it's important for FX to move stably" and that "Japanese authorities are closely watching FX moves with a high sense of urgency". This added to weekend comments from the re-appointed chief currency official Masato Kanda who reiterated their vigilance and told reporters they won’t rule out any options when it comes to handling currency matters appropriately.
US: Scott Rises In Republican Primary Polling
Jun-27 18:12
A new poll from NBC has found that Senator Tim Scott (R-SC) has “risen sharply” as the second-choice Republican Presidential candidate.
- NBC: “[Scott] gets support from just 3% of Republicans as their first choice in the GOP presidential primary... [but] the number of GOP voters who see Scott as their second-choice candidate has risen sharply — more than any other Republican candidate polled by NBC News from April to June... In June, 12% of those polled said the same, a 9-point increase over the 3% who said so in April.”
- Scott has campaigned on a more traditionally conservative platform than Former President Trump and Florida Governor Ron DeSantis.
- Scott co-sponsored legislation to repeal the federal estate tax and has also been an advocate for “opportunity zones,” a GOP initiative to boost private investment with low job growth.
- Scott said in March: “A leader with a faith in America would have faith in Americans. That means cutting taxes, not raising taxes, so families can keep their own money, build their own lives and define their own dreams."
Figure 1: Republican Second Choice Preference in Primary
Source: NBC News
