CHINA: Bond Futures Continue in Tight Range
May-23 03:19
- Bond futures have trended in a very tight range all week, a sign that the Central Bank continues to manage interbank liquidity with a steady hand.
- The 10YR future is down just --0.05 today at 108.77 and has traded in a 0.2 range for the last three weeks.
- The 10YR sits at the midpoint of the 20-day EMA of 108.84 and the 5-day EMA of 108.72.
- The 2YR future is flat today at 102.35 and has traded in a very tight range for several weeks as monetary policy is controlled tightly and expectations well managed. The 2YR bond future remains below all major moving averages, the nearest being the 20-day EMA at 102.47.
- CGB's have traded in a tight range over the last few weeks with the 10YR anchored around 1.67-1.68%
- The key data release for the Chinese economy next week will be Industrial Profits out on the 27th.
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JGBS: Follows US Tsys Into A Twist-Flattener At Lunch
Apr-23 03:02
At the Tokyo lunch break, JGB futures are weaker, -32 compared to the settlement levels, but above session lows.
- Cash US tsys have twist-flattened in today’s Asia-Pac session, with yields 2bps higher to 8bps lower. This comes with risk-on sentiment extending into today’s Asia-Pac session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence). Such fears were a further weight on broader US asset related sentiment.
- Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
- The cash JGB curve has twist-flattened, pivoting at the 20-year, with yields 4.5bps higher to 5bps lower. The benchmark 10-year yield is 3.6bps higher at 1.351% versus the cycle high of 1.596%.
- The swaps curve has also twist-flattened, with rates 3bps higher to 4bps lower.
- Today, the local calendar has been light, with Jibun Bank PMIs as the highlight. The Tertiary Industry Index is due later. Tomorrow will see PPI Services.
AUD: A$ Strengthens On Better Risk Appetite, More Fed Speakers Later
Apr-23 02:53
AUDUSD reached a high of 0.6405 earlier but has been unable to hold breaks above 64c. It is currently up 0.4% to 0.6394 supported by more positive risk sentiment with equities and commodities higher. The greenback has trended lower since it peaked early in the session following President Trump’s comments that he wouldn’t sack Fed Chair Powell and that China’s tariffs would finish below the current 145%. The USD index is still up 0.1% today.
- AUDNZD has recently exceeded 1.07, a level it has struggled to hold. The pair is up 0.3% to 1.0704, close to the intraday high.
- Risk-averse currencies are underperforming today leaving AUDJPY up 0.7% at 90.72 following a high of 91.04 and AUDEUR +0.6% to 0.5608 after reaching 0.5621. AUDGBP is also +0.6% to 0.4804.
- Australia’s S&P Global preliminary April PMIs showed steady but moderate growth but it was driven by the domestic economy though with global trade developments weighing on exports and confidence.
- Equities are generally stronger with the S&P e-mini up 1.4%, ASX +1.6% and Hang Seng +1.6% but CSI 300 flat. Oil prices continue to rise with WTI +0.6% to $64.04/bbl. Copper is 0.3% higher and iron ore around $99-100/t.
- Later there is more Fedspeak with Goolsbee, Musalem, Waller, Hammack and Kugler appearing. US preliminary April S&P Global PMIs, March housing data and the Fed’s Beige Book are released. European April PMIs and euro area February trade print.
- The IMF/World Bank & G20 finance ministers/central bank governors meetings take place. The ECB’s Lane and Cipollone participate in panels and BoE’s Bailey and Breeden also appear, while BoE’s Pill speaks at another event.
FOREX: USD Struggles To Sustain Earlier Bounce
Apr-23 02:25
The USD sits well off earlier highs, the BBDXY index back slightly under 1223, against earlier highs just above 1229. We are still a touch above end Tuesday levels for the index in NY. This still suggests a bearish mindset is in play for the USD. Early USD gains were driven by Trump comments around having no intention to fire Fed Chair Powell, while also noting end tariff levels for China would be below the current 145%.
- Safe havens like JPY and CHF saw the biggest moves against the USD, but have retraced a large portion of these moves. USD/JPY got to 143.22, but no sits back at 141.90, session lows were at 141.49. USD/CHF got to 0.8287, but is now back at 0.8220/25. EUR/USD is near 1.1400, versus earlier lows of 1.1308.
- In the cross asset space, the US equity futures bounce, following the earlier Trump comments, is largely holding but we are away from best levels, Eminis last +1.3%. Regional equities are mostly higher, with tech and Hong Kong markets outperforming. China markets are lagging somewhat.
- US yields are lower, led by the back end of the curve, 10yr back to 4.34%.
- AUD and NZD have seen less volatility. AUD/USD couldn't sustain earlier gains above 0.6400 (but is still +0.40% firmer), while NZD/USD is little changed, last near 0.5970/75.
- Outside of some Japan data (tertiary industry index) the data calendar is empty for the remainder of today's Asia Pac session.
