CHINA: Central Bank Drains Liquidity via OMO.
Oct-31 01:25
- PBOC issues CNY327.6bn of 7-day reverse repo at 1.5%.
- Today’s maturities CNY798.9
- Total net liquidity withdrawal CNY471.3bn
- The PBOC maintains liquidity in the interbank market through the issuance of reverse repo.
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US TSYS: Tsys Futures Edge Higher On Haven Bid
Oct-01 01:09
- Tsys futures are slightly higher this morning on what looks to be a haven bid as tensions look to rise in the middle east we are currently trading at session best and continuing the bounce off the overnight lows. TU is +01 at 104-04⅞ while TY +06 at 114-15+
- Israel Confirms It Has Begun Targeted Ground Raids in Lebanon - “limited, localized and targeted” raids against Hezbollah targets in the border area of southern Lebanon, the IDF posted on X
- Later today Atlanta Fed President Raphael Bostic and Fed Governor Lisa Cook will speak
- Cash tsys curves are flattening, with yields 0.5-1.5bps lower. The 2yr is -08bps at 3.633, while the 10yr is -1bps at 3.769%
JGBS: Cash Twist-Flattener, BoJ SOO Cautious About Future Hikes
Oct-01 01:08
In Tokyo morning trade, JGB futures have reversed overnight weakness to be +10 compared to settlement levels.
- The BoJ Summary of Opinions from the September policy meeting gave a cautious outlook in terms of future policy adjustments. One of the key sentences we took away when talking about the economy was "In considering any further policy interest rate hike, attention is warranted for the time being on consumer prices, the momentum toward next year's annual spring labour-management wage negotiations, and developments in the U.S. economy."
- Japan's Q3 Tankan survey results were mostly firmer than expected. For large manufacturers, the current index and outlook metrics both ticked higher. The outlook for this segment is close to cycle highs.
- Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s Powell-induced sell-off.
- The cash JGB curve has twist-flattened, pivoting at the 2-year, with yields 5bps higher to 3bps lower. The benchmark 10-year yield is 1.2bps lower at 0.850% versus the cycle high of 1.108%.
- Swap rates are 2bps lower to 2bps higher, with a steepening bias. Swap spreads are tighter out to the 10-year and mixed beyond.
FOREX: USD A Touch Firmer, Mostly Against Yen, Limited Moves Overall
Oct-01 01:06
The USD is a touch firmer in the first part of Tuesday dealings. The USD BBDXY index is unchanged at 1222.85. Yen is the weakest performer in the G10 space, off around 0.20% to be last around 143.90 in USD/JPY terms (earlier highs were at 144.12). We are still well sub Friday highs from last week (146.49).
- The BoJ Summary of Opinions painted a cautious outlook around further rate increases, with the CPI trend, wage developments and the US economy all key watch points. The stronger yen has also reduced inflation risks.
- Earlier data showed mixed labour market trends for Japan, while the Q3 Tankan survey results were mostly firmer than expected, but don't show an economy running away rapidly. Local Japan equities are tracking higher as well.
- The summary of opinions has weighed on yen at the margins, while carry over weakness from Monday's session may also be in play. US yields are lower in early dealings, but losses are not much beyond 1bps at this stage.
- We did see yen somewhat stronger earlier when headlines crossed of targeted ground raids being conducted by Israel into Lebanon, but the impact was limited.
- Elsewhere, NZD/USD is down a touch, last near 0.6340/45. Earlier data from the NZIER suggested still weak Q3 domestic activity but that sentiment was improving. Inflation expectations came down sharply. NZ Treasury echoed similar sentiments in its fortnightly update.
- AUD/USD is close to steady, last near 0.6910/15. We have Australian building approvals and retail sales for August coming up soon.
