SOUTH KOREA: Front End Rates Down Modestly Post BoK, KRW Down, Kospi Rallies
Market reaction in terms of the BOK outcome has seen front end yields dip. Per SOVM on BBG, the 3yr government bond yield was last off around 2bps to 2.31%. recent lows in the 3yr bond are around 2.25%, recorded in early March.
- In the NDIRS space, the 3m3m rate is off around 2-3bps, last close to 2.38%, we did see lows of 2.33% earlier. The BoK outcome was clearly a dovish cut, with further rate cuts likely to come. However, Governor Rhee noted it was unlikely the policy rate would fall below 2% in the near (after earlier remarking in the press conference that there is a chance of larger cuts in the future).
- The 6 month outlook sees rates closer to 2.10%.
- The dovish BoK outcome has likely weighed on KRW at the margins, although broader USD sentiment has rebounded strongly after a US court ruled against Trump's reciprocal tariffs. US equity futures are up strongly, along with Spot USD/KRW got to highs of 1385.35, but we sit back at 1382.5 now (around 0.50% weaker in won terms).
- Governor Rhee touched on FX, noting Asian nations have had currency talks with the US, but wouldn't elaborate on talks held with the South Korean Government. USD/KRW fell on these headlines, but there was no follow through.
- The Kospi has rallied strongly, so far today, up a further +1.6%, putting the index above the 2700 level.
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CANADA: Minority Liberal Government Likely, CAD Gives Up Earlier Gains
CTV has said that PM Carney will hold government following elections but again it will be a minority government. Elections Canada has allocated 341 of the 343 districts with Carney’s Liberals leading in 157 with 43.3% of the vote and so even they win the remaining 2 seats will be short of the 172 needed for a majority. It does look like they will hold more than the 151 they had in the last parliament though.
- The Conservatives are leading in 148 (41.3%) gaining 28 but not enough to take government. The major parties benefited from a swing away from smaller ones with Bloc Quebecois, New Democrats and the Greens likely to hold fewer districts.
- The Canadian dollar strengthened against the greenback when Canadian networks called the election for Carney signalling stability in the fight against US tariffs, however it has now given up those gains as the US dollar has broadly strengthened again (BBDXY +0.2%). USDCAD fell to 1.3809 but is now up 0.2% on the day to 1.3855.
AUD: AUDUSD Unwinds Gains After Reaching 0.6450 As USD Strengthens Again
Aussie is generally outperforming the G10 benefitting from today’s better risk tone with equities rallying, which may be in response to reports of some easing of US auto tariffs but there was little reaction at the time. AUDUSD has given up its gains though to be down 0.1% at 0.6423 after today’s peak of 0.6450. It had fallen to 0.6422 earlier in the session. The US dollar is 0.1% higher on the day.
- AUDJPY is up 0.1% to 91.47 after a high of 91.69. The risk-averse Swiss franc and yen are currently underperforming the G10.
- AUDEUR peaked at 0.5649 and is now up 0.1% at 0.5635. AUDGBP is flat though at 0.4785 off today’s high of 0.4798.
- AUDNZD rose to 1.0785 earlier but is now around 1.0770 to be up 0.1% today.
- Equities are rallying with the ASX up 0.8% and Hang Seng +0.7% but CSI 300 down 0.2%. The S&P e-mini has reversed earlier losses to be up 0.1%. Oil prices are down with WTI -0.5% to $61.72/bbl. Copper is up 0.4% and iron ore steady around $98/t.
- Later US April consumer confidence, March merchandise trade, JOLTS job openings, inventories and February house prices print, as well as the April European Commission survey, Spanish Q1 GDP and preliminary April CPI. The ECB’s Cipollone and Donnery speak.
CHINA: Bond Futures Rally on Liquidity Injection
- This morning’s OMO saw a sizeable liquidity injection and unsurprisingly bonds are rallying.
- China’s 10YR bond future is up +0.185 to 109.04 and remains firmly above all major moving averages, the nearest being the 20-day EMA of 108.73
- The 2YR bond future is up just +0.03 at 102.36 and remains below all major moving averages, the nearest being the 20-day EMA at 102.43.
- The cash market is strong also with the CGB 10yr down -1bp this morning at 1.63% with the Hang Seng and Shenzhen bourses higher whilst the CSI 300 is down marginally
