JGBS: Futures Back To Overnight Lows After Morning Strength Reversed
At the Tokyo lunch break, JGB futures are weaker, -18 compared to settlement levels, and back near overnight closing levels.
- There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined labour market and IP data, which came in slightly stronger or in-line with market expectations.
- Cash US tsys are flat to 1bp cheaper across benchmarks in today's Asia-Pac session after giving early strength.
- The cash JGBs are generally cheaper, led by the belly, with yields 0.6bp lower (2-year) to 2.5bps higher (futures-linked 7-year). The benchmark 10-year yield is 2.3bps higher at 0.695% versus yesterday’s low of 0.638%. The 2-year JGB sits unchanged at 0.023% after yesterday’s poorly received supply.
- Swap rates are little changed out to the 30-year, with the 40-year rate 2.3bps higher. Swap spreads are tighter out to the 30-year.
- Bloomberg reports that a Japanese power company sold its first floating-rate bonds, seeking to attract investors concerned about rising rates with the rare deal as Bank of Japan uncertainty mounts. (See link)
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CROSS ASSET: Weaker Caixin Weighs on HK/China Equities, Keeps NZD & AUD Under Pressure
The weaker than expected Caixin PMI has reinforced established themes in the first part of the Wednesday session. Most direct impact has been seen in terms of China and HK equities. The CSI 300 erasing a gain of as much as 1%, while the HSI is down around 0.55%, close to session lows at the time of writing.
- US equity futures are weaker, although haven't reacted much to the China data, last near 0.30% for Eminis.
- The BBDXY is 0.10% higher to 1227.60/70. Yen is outperforming higher beta FX, with NZD the weakest performer at -0.60%, last near 0.5790. The earlier employment data miss weighing, while yen weakness has been tempered by a step up in official FX rhetoric. AUD/USD is down 0.20% to 0.6325.
- USD/CNH is slightly higher but remains sub 7.3400.
- Oil has drifted a little lower, WTI last near $81.10/bbl. Iron ore is down off earlier highs, last near $123.25/ton.
- US Tsys have largely looked through the Caixin PMI print.
US TSYS: Narrow Ranges Persisting
Tsys are holding in narrow ranges in the Asian session, the space has looked through the Caixin Mfg PMI print which was weaker than forecast. The measure is back in contractionary territory. Cash tsys sit ~1bp richer across the major benchmarks. TYZ3 deals at 105-29+, -0-08, the 0-03+ range remains intact.
AUD: A$ Lower But Rallies Vs Kiwi, Waiting For Fed
AUDUSD is down around 0.2% to around 0.6321 off the intraday peak of 0.6344 which occurred before disappointing Australian building approvals and Asian PMI data. The pair is just off today’s low of 0.6318. The USD index is 0.1% higher ahead of the Fed decision later. Rates are widely expected to be left unchanged.
- Aussie is down 0.5% versus the yen to 95.66, close to the intraday low. AUDNZD is back above 1.09 following the softer-than-expected NZ labour market data. The pair is up 0.4% to 1.0916. AUDEUR is 0.2% lower to 0.5983 and AUDGBP -0.1% to 0.5210.
- Equity markets are generally stronger with the ASX up 0.5%, Nikkei +2.2% but Hang Seng down 0.2%. The S&P e-mini is down 0.3%. Oil prices are up about 0.3% with Brent at $85.23/bbl. Iron ore has rallied sharply to $123-124/t and copper is down 0.2%.
- Markets are looking to today’s Fed meeting and press conference (see MNI Fed Preview). Also October US ADP employment and manufacturing ISM print.
