AUSSIE BONDS: Futures Bid Overnight; RBA Gov. Lowe’s Speech Eyed
Aussie bond futures tracked the bid in global core FI markets on Wednesday, with the move higher in the latter derived from an uptick in growth-related worry (fleshed out elsewhere).
- Cash ACGBs run 7.5-9.0bp richer across the curve as cash has played catch up to the bid in futures, with the 4- to 7-Year zone leading the way higher.
- YM and XM are +8.5 apiece, challenging their respective overnight highs at writing. The 3-/10-Year EFP box is steeper, with 3-Year EFP narrowing and 10-Year EFP little changed, while Bills run flat to 10 ticks richer through the reds.
- STIR markets now price is ~32bp of tightening for the RBA’s Oct policy meeting, continuing to edge lower after Tuesday’s decision, reflecting expectations from some quarters for less “aggressive” hikes at incoming meetings.
- Looking ahead, Australian trade data for July is due, although focus is expected to centre around Gov. Lowe’s speech on “Inflation and the Monetary Policy Framework”, as well as the Q&A after.
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MNI: UK BRC JUL BY VALUE SHOP SALES LFL +1.6% YY, TOTAL +2.3% YY
- MNI: UK BRC JUL BY VALUE SHOP SALES LFL +1.6% YY, TOTAL +2.3% YY
JPY: USD/JPY Retraces Gains Post-Asia, Yen Remains Weak
Spot USD/JPY showed at a fresh monthly high on Monday but gave back those gains in European hours, before recovering to neutral levels in the NY session.
- A slide in U.S. Tsy yields dragged USD/JPY away from intraday highs by promoting a degree of narrowing in U.S./Japan yield gap. The spread between yields on 10-year gov't debt shrank ~8bp on Monday.
- Musings on FOMC policy action continued to affect price action from the background, as participants assessed last Friday's blowout NFP report and prepared for this Wednesday's U.S. CPI figures.
- Equity strength observed in London hours petered out, with U.S. stock benchmarks paring initial gains. The VIX index was marginally higher come the end of play, but USD and JPY failed to benefit from renewed caution.
- USD/JPY 1-month risk reversal extended its recent gains to best levels since Jun 13, when it dived into negative territory.
- Spot USD/JPY trades at Y135.00 at typing, a touch higher on the day. Gains past Y135.96, the 61.8% retracement of the Jul 14 - Aug 2 downleg, would expose Jul 27 high of Y137.46. On the flip side, bears look for a sell-off towards the 100-DMA/Aug 2 low at Y131.01/130.41.
- The domestic data docket is fairly light during the remainder of the week, but a Cabinet reshuffle expected tomorrow will provide interest.
AUSSIE BONDS: Futures Look Through Overnight Highs
The bullish flattening of the U.S. Tsy curve supported Aussie bond futures in overnight dealing, with the contracts going out just shy of their respective post-Sydney peaks. The space has extended its bid in early Sydney trade, leaving YM +4.0 & XM +7.5 shortly after the Sydney re-open, with both contracts looking through their overnight high. Bills run flat to +2 through the reds.
- The NAB business and Westpac consumer confidence surveys are due for release today, with the recent move lower in the latter overshooting what we have seen in the former, which you would probably expect against the current inflationary/cost of living squeeze backdrop. Note that the wage components of the NAB survey will probably garner the bulk of the attention when it comes to these releases. Elsewhere, A$100mn of indexed-linked Aug-40 supply is due from the AOFM.
