JGBS: Futures Seeing Downside Bias, Negative Spillover In Play

It has been a relatively steady start for G10 FX in the first part of Tuesday trade. The USD BBDXY index was last little changed, close to 1274, after making fresh 12 month highs in Monday trade. 

• Headlines crossed a short while ago from Decision Desk HQ that the Republicans have enough seats to control the US House (per BBG). This is not that surprising, with most media outlets expecting this. It does confirm a likely Republican sweep of the Presidential office, Senate and House.
• Focus will shift to cabinet appointments and likely policy steps, with tax cuts, reduced government spending and more protectionist trade policies likely to be on the agenda.
• USD/JPY was last near 153.65/70, little changed for the session. US cash Tsy trading has re-opened, with yields all firmer, which is line with the futures move form Monday. The 10yr was last at 4.33%, +2.5bps.
• US equity futures are down a touch, while tech sensitive equity plays are down in the region apart from Japan markets.
• AUD/USD is relatively steady as well, the pair last near 0.6575. Consumer and business sentiment both rose this morning. The Westpac measure to 94.6, fresh highs since back to Q2 2022. NAB Business confidence rose to +5 from -2. Conditions were unchanged at +7.
• NZD/USD is also steady, close to 0.5965 in latest dealings. Earlier data showed a more positive trend for retail spend.
• The data calendar is light for the remainder of the Asia Pac session. 

The names of people expected to take leadership positions in President-elect Trump’s second administration continue to make headlines. Today the Wall Street Journal reported that former veteran Republican Mike Waltz from Florida will be National Security Adviser, according to people familiar with talks. This is an important role as not only is Senate approval unrequired but also Trump has declared he’ll bring peace to Ukraine and the Middle East. 

• Trump also wants to increase the US’ deterrence especially against the growing cooperation between Iran, Russia, North Korea and China.
• The National Security Adviser is responsible for coordinating between the major US security agencies and reporting to the President. It also includes implementing his policy agenda.
• Waltz served as a Green Beret in the Middle East, Africa and Afghanistan, according to the Wall Street Journal. 

Westpac consumer confidence has seen a sharp improvement over the second half of the year but the US election result has added some uncertainty. November rose 5.3% m/m to 94.6 after 6.2%. It is now its highest since April 2022, the month before the RBA began to tighten, and up 18.3% y/y%. Rates have been unchanged for a year now and real incomes have begun to rise, which is likely supporting the sentiment recovery, but it remains below the historical average and the neutral 100-level.

• The survey week ended November 9 and so included the RBA decision (Tuesday) and US election result (Wednesday). Westpac observed that responses were materially higher at the start of the week than the end. The RBA announcement didn’t impact sentiment but there was a “sharp fall” following the US election outcome with it rebounding tentatively by week end.
• The significant range of responses added an “unusually high degree of uncertainty”. The key will be whether the US election impact is sustained or whether domestic factors drive sentiment again next month.
• Other details were positive with 35% planning to spend less on Christmas this year, closer to average, compared with 40% in 2022 and 2023. But the “time to buy a major household item” was little changed and remains well below neutral.
• Mortgage rate expectations fell 3.2% to the lowest level since August 2012. Around 52% expect mortgage rates to be “unchanged or lower” by November 2025 up from July’s 27%.
• There were significant rises in the forward looking outlooks for family finances and the economy. 
• Consumers are feeling secure in their jobs with unemployment expectations down 7.2% to the lowest since April 2023. October labour market data print on Thursday.
• “Time to buy a dwelling” jumped 11.3% but was driven by Victoria where prices have underperformed. Overall house price expectations fell 2.1%. 

Australia Westpac consumer confidence index