JGBS: Futures Spike, But Past Month Ranges Hold, BoJ Ueda Speech Next Week
JGB futures have mostly maintained a positive bias through the first part of Friday trade. The March future (JBH5) was last 142.56, +.42, versus settlement levels. Earlier highs were at 142.72, which were close to earlier Dec 9 highs.
- These moves threaten to break us out of ranges that have held over the past month or so.
- Support has been evident from a positive US Tsy futures backdrop. US equity futures are down as well, with some concern around a government shut down in the near term, with the US House failing to pass the latest funding bill late on Thursday US time. A generally softer commodity price backdrop in the past week has also likely been a support.
- Earlier on the data front we had Nov national CPI print, which was a touch above market expectations for the core print, but the detail was mostly softer outside of a bounce in utility prices. Yen has been volatile as verbal jawboning picks up after Thursday's sharp drop.
- Cash JGB yields are all softer, with the belly of the curve the weakest in yield terms. The 7ys is down 3bps to sub 0.79%. The 10yr yield is back to 1.05%.
- Swap rate falls have been slightly in the belly of the curve. The 10yr swap rate is back close to 1.00%.
- Next week we have the Oct BoJ Mins on Dec 24, while Governor Ueda will speak on Christmas day, then the Summary of Opinions from the BoJ Dec meeting will be released on Dec 27th. Also out on the 27th is Tokyo Dec CPI.
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AUSSIE BONDS: Little Changed, RBA Governor Speech Tomorrow
ACGBs (YM -1.0 & XM +0.5) are slightly mixed, with a flattening bias, in today’s data-light Sydney session.
- "Investors such as UBS Asset Management and Jamieson Coote Bonds Pty see value in Australian bonds as the global debt selloff looks stretched and anticipation of a policy pivot grows." (See link)
- The latest round of ACGB Dec-35 supply showed strong pricing, with the weighted average yield printing 0.47bp through prevailing mids. The higher outright yield and steep curve likely aided the absorption of today’s ACGB supply. However, the notable worsening in global bond sentiment likely weighed on demand at today’s auction.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest haven demand-induced gains.
- Cash ACGBs are flat, with the AU-US 10-year yield differential at +16bps.
- Swap rates are little changed.
- The bills strip is slightly cheaper across contracts, with pricing flat to -3.
- RBA-dated OIS pricing shows no easing by year-end. A 25bps rate cut is not fully priced until July.
- Tomorrow, the local calendar will see a speech by RBA Governor Bullock at the Women In Payments Conference.
FOREX: USD Ticks Higher, USD/JPY Close To 155.00, Aggregate Moves Modest
The earlier outperformance from risk currencies has given way to a firmer USD backdrop as Wednesday trade has unfolded. The USD BBDXY index was last around 1279.15, a touch higher for the session.
- Aggregate FX moves are not large at this stage. USD/JPY has traded with a positive bias, but is yet to break above 155.00. US yields sit close to unchanged, albeit with a slight bias to move higher at the back end.
- US equity futures are off earlier highs but still sit in positive territory, last +0.1%. This comes ahead of the key Nvidia earnings release. Regional equities are mixed, but aggregate moves aren't much beyond 0.50% at this stage.
- AUD and NZD sit off earlier highs, but are only down 0.10% at this stage. AUD/USD last near 0.6525, NZD just under 0.5900. EUR/USD has slipped back under 1.0600.
- We remain within broader ranges though, as markets await fresh catalysts. Technical indicators still suggest USD dips will be supported.
EQUITIES: China & HK Equities Trade In Narrow Ranges Ahead Of Nvidia Earnings
Hong Kong and China equities are mostly higher today, with earlier losses now being erased. China's central bank kept its loan prime rates unchanged, in line with expectations. The HSI is trading flat with losses in Geely Automobile, Xiaomi, and Alibaba offsetting wider gains, while the CSI 300 now trades 0.2% higher. Investors remained cautious ahead of Nvidia's earnings, which could serve as a key catalyst for global sentiment. Meanwhile, Chinese tech stocks faced uncertainty amid geopolitical concerns tied to the next Trump administration.
- China healthcare stocks are the top performing today, the CSI 300 Healthcare Index is 2.45% higher with Tigermed jumping 8%. Small & mid-cap stocks out outperforming large-cap today, with the CSI 2000 up 2.50%, while the CSI 1000 trades 1.60% higher.
- Hong Kong listed equities are trading in narrow ranges today, with major benchmarks trading little changed.
