TURKEY: CBRT Governor Says Main Trend of Inflation Slowing Down

The recent move lower in bonds is Tsy led, but there hasn’t been anything in the way of meaningful fresh news flow to drive the move.

• Momentum/market flow are the best explainers we have as TY futures break to fresh lows breaching support at 112-10+, followed by key support at 112-07. Next level of downside interest is 112-02+, the Sep 25 low.
• A reminder that ongoing repricing in the EUR short end, following a round of hawkish ECB communique from Executive Board member Schnabel, provided the initial selling impetus for bonds today, extending on the theme seen last week.  

Kyodo News reports that according to the Nuclear Regulation Authority, no abnormalities have been confirmed at Tohoku Electric Power's Higashidori Nuclear Power Plant in Aomori Prefecture or the Onagawa Nuclear Power Plant in Miyagi Prefecture, nor at Tokyo Electric Power's Fukushima Daiichi Nuclear Power Plant in Fukushima Prefecture, following the earthquake, which recorded a seismic intensity of 6+ in Aomori Prefecture. All plants in the affected regions are carrying out safety checks. 

• Comes as PM Sanae Takaichi orders an "all-out response" from gov't services to protect lives and assist with search and rescue efforts ahead of determining the extent of the damage sustained from the earthquake, or any resulting tsunami.
• See JAPAN: Red Tsunami Warning Issued For Areas Of Northern Japan

• The sharp fall in Chinese export growth to the US showed tentative signs of bottoming out in November, likely a function of easing trade tensions and lower effective tariff rates compared to earlier this year. Bilateral tariff rates between the US and China were lowered last month following a meeting in South Korea. Meanwhile, US Trade Representative Greer noted yesterday that China was “in compliance” of the latest agreements.
• Chinese exports to the US fell 28.5% Y/Y to $33.8bln in November, an acceleration from -25.1% last month. However, 3mma growth was -26.9%, up from -28.4% prior.
• Although Chinese exports to ASEAN nations such as Vietnam remain firm (at least part of which is assumed to be transhipments to the US), growth has started to roll over in recent months.
• Meanwhile, export growth to the EU remains steady at around 10% Y/Y. Although risks of disinflationary Chinese trade diversion have not fully materialised this year, it is still important to monitor - both for the ECB and European Commission. China’s exports remain highly competitive with weak domestic (and export) price pressures putting downward pressure on the real effective exchange rate, in addition to nominal EURCNH upside seen YTD.
• Yesterday, French President Macron addressed these risks directly: “I’m trying to explain to the Chinese that their trade surplus isn’t sustainable because they’re killing their own clients, notably by importing hardly anything from us any more”….” If they don’t react, in the coming months we Europeans will be obliged to take strong measures and decouple, like the US, like for example tariffs on Chinese products”