US CREDIT SUPPLY: Equinor: $1.5B 3-Part New Issue - Launch

TYZ5 reopens at 112-21, down 0-00+ from closing levels in today’s Asia-Pac session.

• Overnight the US 10-year yield had a range of 4.1114% - 4.1753%, closing around 4.127%. 
• Treasury yields moved broadly lower overnight; (2s10s -0.63 at 55.730, 5s30s +0.85 at 102.031).
• 10-Year yields bounced to start the week on the back of global politics but remains subdued below 4.20% as the market works through the US shutdown. I suspect buyers continue to be around the 4.20% area initially and look to fade any move higher for now. 
• MNI BRIEF: Third Mandate Flows From Dual Mandate Success-Miran. Federal Reserve Governor Stephen Miran said Tuesday the central bank needs to lower interest rates and that stable long term interest rates flow from success in achieving the central bank's dual mandate goals. "Most people think that achieving moderate, long term interest rates will naturally come out of achieving maximum employment and stable prices," he said in Q&A at an event hosted by the Managed Funds Association. "I agree with that. I could imagine there being sort of tail scenarios of the world in which that's not the case. But I don't think that any of those tail scenarios are remotely describing a reality that I see now, or that I would expect to see." 
• MNI US DATA: Consumer Inflation Expectations Firm Mildly In September - NY Fed. The NY Fed consumer survey saw inflation expectations on balance increase in September. 1Y and 3Y expectations remain comfortably rangebound whilst the 5Y approach is at the high end of its short historical range.

Fig 1: 10-Year US Yield 2H Chart

Source: MNI - Market News/Bloomberg Finance L.P

In local morning trade, NZGBs are little changed despite US tsys finishing with a solid gain.

• US government shutdown extended into a 7th day, and a lack of breakthrough by the end of this week will begin to prompt furloughed workers to miss pay checks, adding pressure to lawmakers to come to a resolution.
• NZ's fortnightly dairy price auction, via GDT saw a further correction lower overnight. The whole milk powder price fell 2.3% and is now back to levels from Q4 2024.
• After Q2 GDP fell 0.9% q/q, more than the RBNZ's -0.3% projected in August, expectations of a 50bp rate cut increased. Now 10 out of 25 analysts surveyed by Bloomberg are forecasting 50bp of easing on 8 October.
• Two MPC members voted for a 50bp rate cut at the last meeting, but recent and upcoming personnel changes on the committee add to the uncertainty around the October decision. (See MNI RBNZ Preview here)
• RBNZ dated OIS pricing closed slightly softer across meetings. 36bps of easing is priced for tomorrow, with a cumulative 63bps by November 2025.
• Swap rates are slightly mixed.
• RBNZ dated OIS pricing is little changed across meetings. 35bps of easing is priced for today, with a cumulative 62bps by November 2025.

The overnight range was 150.50 - 152.04, Asia is currently trading around 151.90. The pair has extended its move higher and is now testing the pivotal 152.00 area, a break of which will turn the focus back to 155-160. The last CFTC data available showed Asset Managers remained notably long JPY, should these moves begin to gather momentum, they could be forced to first pare back their longs and then if these significant levels are broken begin to rebuild JPY shorts. Many crosses are breaking through some pivotal areas(CNH/JPY Above 21.00) as well and unless the government says something to contradict the markets thinking these could begin to gather momentum. Expect dips to now find support unless there is push back on the market's views of Takaichi’s policies.

• Bloomberg - “Yen Carry Trade Is Back on Radar After Takaichi Jolts Markets. Investors wagered that Sanae Takaichi's pro-stimulus stance would result in a slower timeline for the Bank of Japan's policy tightening. The yen's weakness may sustain the appeal of carry trades, with some strategists predicting the currency will weaken broadly, potentially dropping toward 180 per euro.”
• “EM Carry Trade Thrives on Liquidity, Not Fundamentals. Investors are leaning into the “carry without crisis” narrative — borrowing in low-cost currencies like the yen, parking in high-yielders, and riding the spread differential. This explains why EM debt funds are enjoying their longest streak of positive returns since 2019.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 147.00($1.47b). Upcoming Close Strikes : 150.00($778m Oct 9), 150.15($1.08b Oct 9) - BBG.
• Data/Event : Labor Cash Earnings, BoP Current Account Balance, Eco Watchers Survey Current SA

Fig 1 : USD/JPY Spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P