JGBS: Futures Richer But Overnight Gains Pared At The Tokyo Lunch Break
At the Tokyo lunch break, JGB futures are richer, +33 compared to the settlement levels, but have pared overnight gains sparked by BoJ Governor Ueda's dovish comments.
- There hasn’t been much in the way of domestic drivers to flag.
- According to MNI’s technicals team, recent price action reaffirms the buy-on-dips theme in markets at present. Key resistance lies ahead at 149.21/53, highs from May and March. Clearance of these levels would highlight an important break.
- The cash JGB curve has bull flattened in the Tokyo morning session. Yields are 0.1bp to 3.4bp richer with the futures linked 7-year zone leading. The benchmark 10-year yield is 0.3bp lower at 0.477%, below the BoJ's YCC limit of 0.50%.
- Today the MoF will sell Y500bn at a Liquidity Enhancement Auction for OTR 1-5-year JGBs. It's worth noting that today’s auction takes place amid growing speculation that the BoJ may raise its inflation forecast above 2% and adjust its YCC program at its late July policy meeting.
- Swaps are mixed across the curve with rates 1.1bp higher (2-year) to 2.1bp lower (40-year). Swap spreads are generally wider out to the 30-year and narrower beyond.
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NZD: Pressured In Asia
NZD/USD prints at $0.6220/25, the pair is down ~0.3% thus far on Monday.
- Waning risk appetite as the lack of detail on further Chinese stimulus has weighed on the kiwi in Asia.
- NZD/USD has fallen below the 200-Day EMA ($0.6234) with support coming in below $0.6220 in recent dealing.
- AUD/NZD is little changed dealing in a narrow range above $1.10 handle.
- In May PSI rose to 53.3 and the prior read was revised higher to 50.1.
- Cross asset wise; BBDXY is up ~0.1% , e-minis are down ~0.1% having been up as much as 0.2% in early dealing. WTI futures are 1% lower.
- Looking ahead, on the wires early tomorrow we have Q1 Westpac Consumer Confidence. There is no estimate and the prior read was 77.7.
KRW: 1 Month USD/KRW Back Above 1280, Amid Cross-Asset Headwinds
1 month USD/KRW is back above 1280 (last 1281/82) and not too far off highs from last week around ~1284. Spot USD/KRW has spiked around 0.90%, to be back in the 1283/84 region, this is the pairs strongest gain in 5 weeks. The 20-day EMA sits noticeably higher though, back around 1299.
- Won headwinds are evident from higher USD/CNH levels, with this pair back to 7.1500 and above highs from Friday. Local equities are also weaker, the Kospi off by 0.80% and back close to 2600 at this stage (SocGen shifted its South Korea equity weigh back to neutral). Offshore investors have sold -$282.3mn of local shares today.
AUSSIE BONDS: Slightly Stronger, Thin Local Calendar, RBA Minutes Tomorrow
ACGBs are slightly richer (YM +1.0 & XM +3.0) after trading in a narrow range in the Sydney session. With the local and Asian calendars light today, local participants are likely on headlines watch.
- A reminder that cash US tsys are closed today due to the observance of a US national holiday.
- Cash ACGBs are 2-3bp richer with the AU-US 10-year yield differential at +24bp (using 10-year US tsys Friday closing level).
- Swap rates are 3-5bp lower with the 3s10s curve flatter.
- The bills strip is steeper with pricing +2 to +5.
- RBA dated OIS is 3-8bp softer for meetings beyond September with Feb’24 leading. Terminal rate expectations sit at 4.60%.
- The local calendar is slated to release the RBA Minutes for the June Meeting tomorrow. RBA Deputy Governor Bullock and RBA Assistant Governor Kent are also slated to speak tomorrow.
