AUSSIE BONDS: Forthcoming ACGB Transactions

The USD/JPY range today has been 156.38-157.46 in the Asia-Pac session, it is currently trading around 156.90, -0.25%. The pair dropped pretty quickly into the Japanese fix and then what looked to be some AUD/JPY selling after a soft AU CPI print added to its headwinds. The demand toward 156.50 was again around and the pair is now drifting back toward 157.00. The BOJ has seemingly dropped the ball and the initial green shoots for the Yen look in serious peril. The 149-152 area has now proved to be solid support again. The market punished those who turned long Yen and overall positioning looks to have been drastically reduced as the market gets chopped within this wider range. The 159.00-160.50 area technically looks quite important now and I suspect the BOJ/MOJ will be doing what they can to keep it below there. The first support is toward 156.50-157.00 which continues to provide support and then the 155.00 area. Can the BOJ/MOF stop a move back toward 160 and above, without any efforts from them to prevent it the move almost looks inevitable. Until then the Choppy 152-160 range looks set to continue.

• MNI - Japan IP Below Forecasts But Still Solid y/y Pace, Q3 Tankan Out Tomorrow : Japan Aug (preliminary) industrial production figures were weaker than forecast: we fell 1.7%m/m (after a 0.2% decline in July). In y/y terms we still rose 3.4% (against a 6.8% forecast and 3.9% July outcome). The PMI has moved off its highs recently, but is still suggesting a solid/resilient y/y pace for IP growth. Support continues to come from the external demand side, with export growth running at 19.3%y/y amid strong tech related exports and recovering exports to the US.
• MNI INTERVIEW: Ex-BOJ Sakurai Sees Dec Hike, 2% Terminal Rate. The Bank of Japan will probably wait until December before it raises its policy interest rate to 1.5% from 1.25%, but two further hikes are likely next year before it pauses to take stock of the economy and to weigh potential political resistance and possible financial system strains, former BOJ board member Makoto Sakurai told MNI.
• Options : Close significant option expiries for NY cut, based on DTCC data: 154.75($1.02b), 157.00($1.42b), 159.30($1.16b). Upcoming Close Strikes : 157.00($1.86b Oct 2), 158.00($2.31b Oct 2), 158.25($1.57b Oct 1) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 105 Points

Fig 1 : USD/JPY Spot Daily Chart

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

The total value of social logistics in China rose 4.9% from a year earlier to CNY243.6 trillion in the first eight months, with the growth rate easing 0.1 percentage point from the Jan-Jul period, Securities Daily reported. Industrial logistics demand remained broadly stable, while emerging growth drivers contributed more to incremental demand, supported by strong output of robot reducers and industrial robots, said Meng Yuan, analyst at the China Logistics Information Center. Logistics demand is expected to accelerate in the fourth quarter as the industry enters its traditional peak season, Meng added.

The People’s Bank of China will cut the interest rate on its pledged supplementary lending (PSL) facility by 25 basis points, lowering the one-year rate to 1.5%, Securities Daily reported Tuesday, citing a central bank statement. The PBOC will also broaden the PSL facility to support investment in water infrastructure, power grids, computing, communications, urban pipelines and logistics networks. The PSL provides long-term funding to policy banks, strengthening their capacity to extend medium- and long-term credit to the real economy, analysts said. Separately, the central bank raised the quota for its relending facility supporting technological innovation and equipment upgrades by CNY200 billion to CNY1.4 trillion. It also increased its relending quota for agriculture and small businesses by CNY500 billion to CNY4.85 trillion. Within that program, the quota for private enterprises rose by CNY300 billion to CNY1.3 trillion.