JGBS: Futures Near Session Lows At Tokyo Lunch Break
Aug-03 02:38
At the Tokyo lunch break, JGB futures sit weaker, -27 compared to settlement levels.
- There hasn’t been much in the way of domestic news to flag, outside of the previously outlined weekly investment flows for the end of July, which showed foreign outflows from local bonds and foreign purchases of bonds by Japanese investors. Jibun Bank Services and Composite PMIs printed little changed at 53.8 and 52.2 respectively.
- Cash JGBs are cheaper across the curve with yields 0.3bp (1-year) to 2.3bp (futures linked 7-year) higher. The benchmark 10-year yield is 1.9bp higher at 0.647%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
- Swap rates are higher across the curve. Swap spreads are mixed.
- Today the MoF plans to sell Y250bn of 10-year Inflation Linked JGBs.
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AUD: A$ Range Trading Ahead Of Upcoming RBA Decision
Jul-04 02:26
Aussie is fairly steady ahead of today’s RBA announcement. AUDUSD is up 0.1% to 0.6677, close to the intraday high of 0.6684. It dipped to 0.6669 on the opening of HK/China markets but has bounced back. The USD index is flat.
- The RBA decision is announced at 1430 AEST and with valid arguments for both a pause and another hike, it is looking very close (see MNI: RBA Preview - July 2023). The market has 35% chance of a rate rise priced in.
- Aussie is steady versus kiwi at 1.0842. AUDJPY is flat at 96.53. Aussie is up 0.1% against the euro and pound at 0.6121 and 0.5261 respectively.
- Equity markets are mixed today with the Nikkei down 1.1%, ASX -0.1% and Hang Seng up 0.3%. The S&P e-mini is -0.1%. Brent crude is 0.5% higher to $75.04/bbl after declining on Monday. Copper is down 0.1% and iron ore slightly lower to around $110.50/t.
- The US is closed for the Independence Day holiday. Later there is German May trade data and Canadian June manufacturing PMI.
NZD: Marginally Firmer, Ranges Narrow In Asia
Jul-04 02:16
NZD/USD prints at $0.6155/60, the pair is ~0.1% firmer today.
- Kiwi firmed after another strong Yuan fix from the PBOC before paring gains to sit at current levels. Ranges have been narrow with ~20 pip range persisting.
- Yesterday's highs remain intact thus far. General liquidity remains hampered by the Independence Day holiday.
- AUD/NZD is little changed dealing in a narrow range see-sawing around the 200-Day EMA.
- Cross asset flows are muted, BBDXY is a touch lower as are e-minis. US Tsy futures are little changed.
- Trans-tasman flows will come to the fore with the RBA's latest monetary policy decision this afternoon which is the highlight of today's Asian session.
AUSSIE BONDS: Cheaper, At Yield Highs, Awaiting RBA Decision
Jul-04 01:58
ACGBS are sitting at Sydney session lows (YM -7.0 & XM -4.5). There has been no meaningful news flow today ahead of the RBA policy decision today (0530 BST).
- As highlighted in our RBA Preview (link), today’s decision is again likely to be “finely balanced”. This is reflected in forecasts with the Bloomberg survey containing 14 analysts who expect unchanged rates and 13 forecasting a 25bp increase. If there is a pause, the tightening bias is likely to be maintained and it is likely to be made very clear that a pause doesn’t mean that the RBA has finished tightening.
- RBA dated OIS currently attaches a 34% chance of a 25bp hike today.
- Cash ACGBs opened 4-5bp cheaper with the AU-US 10-year yield differential +2bp at +15bp.
- Swap rates are 5-7bp higher with EFPs slightly wider.
- The bill strip has bear steepened with pricing -3 to -8.
- Pay rises for workers on enterprise bargaining agreements recorded their biggest jump in 11 years, and wage growth is tipped to exceed official forecasts, maintaining pressure on the Reserve Bank to raise interest rates. (See link)
