JGBS: Futures Weaker But Off Worst levels As BOJ Nakamura Leans Dovish
Dec-05 05:15
JGB futures are weaker, -5 compared to settlement levels, but off the session’s worst levels.
- BOJ board member Nakamura stated that he is personally not confident about the sustainability of wage growth, while also noting inflation is at risk of missing the 2% target from fiscal 2025 onwards (per RTRS).
- Nakamura also stated that his growth forecast is below the board median due to a chance consumers may hold off spending and capex could be delayed. Further adjustments to easy policy settings should be done gradually, Nakamura stated.
- While it is known that Nakamura leans dovish, the short-end JGBs managed to slightly richen after his remarks.
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session. Today's US calendar will see Challenger Job Cuts, Trade Balance and Jobless Claims data. Fed's Barkin will also speak on the economic outlook.
- Cash JGBs are flat to 1bp richer across benchmarks beyond the 1-year and out to the 30-year. The benchmark 30-year yield is 0.2bp higher at 2.292% after today’s auction delivered solid results.
- Swap rates are 1-2bps lower out to the 10-year and 2-5bps higher beyond. Swap spreads are tighter out to the 7-year and wider beyond.
- Tomorrow, the local calendar will see Cash Earnings, Household Spending, and the Coincident and Leading Indices.
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FOREX: A$ Up On Hawkish RBA Hold, But Moves Modest Ahead of US Election
Nov-05 05:10
The USD is mixed against the majors in the first part of Tuesday trade. The BBDXY index is little changed, last near 1258.65. Yen has weakened a touch, while AUD is up modestly (as the RBA left rates on hold, but kept hawkish language). NZD is also up a touch.
- AUD/USD is tracking back towards 0.6600, so up around 0.15% in latest dealings. As expected the RBA kept rates on hold, although with hawkish rhetoric. The central bank needs to vigilant to upside inflation risks and is not ruling anything in or out.
- OIS is slightly firmer for Australia and this is likely helping the A$, although outperformance is modest. RBA Governor Bullock noted that the current policy settings are correct and that the path back lower for inflation will be slow.
- NZD/USD is up a touch to 0.5980. We had a better Caixin services PMI print in China, aiding to recent positive China economic momentum. This has helped China and HK equities, a likely positive for the antipodean currencies.
- Still, aggregate moves are modest, with overnight vols very elevated ahead of US election outcomes tomorrow.
- USD/JPY is drifting higher, last near 152.45/50, off around 0.20% in yen terms. US yields are up a touch, but gains are less than 1bps at this stage.
- The above equity moves may be weighing on yen crosses at the margin. AUD/JPY is back to 100.55/60, still within recent ranges.
- Later US October services ISM/PMI and September trade print, as well as UK October services/composite PMIs. The eurogroup meeting continues and the ECB’s Lagarde and Schnabel speak.
ASIA STOCKS: China Markets Up, Others Mixed Before the US Election.
Nov-05 04:50
- Following stronger than expected CAIXIN PMI Services data, China led the way with the CSI 300 up almost 2%, whilst Shanghai Comp was up +1.80%, Hang Seng up +1.20% and Shenzhen Comp up +2.6%.
- In Korea a weaker than expected CPI print potentially makes the next BOK meeting live. Despite this, stocks retreated with the KOSPI down -0.25%.
- In Malaysia, the currency had a less volatile day relative to previous days bringing a reprieve to markets. The FTSE Malay KLCI posted moderate gains at +0.15%.
- In Indonesia, the GDP print for 3Q was moderately behind expectations. The markets have endured the volatility of the currency, which has seen more pronounced in recent sessions. The Jakarta Composite was down today off -0.20%.
- In India, the NIFTY 50 was opening weaker down -020% with data showing that the period of foreign inflows into the stock market has taken a pause.
US TSYS: Cash Yields Up as Futures Steady in Asia Trading.
Nov-05 04:23
- With the election drawing closer and the uncertainty over the result greater, the move lower in yield stalled in Asian trading with yields across the curve higher.
- Cash markets were weaker throughout the Asia trading day with the 2YR +0.4bp to 4.168, 10YR +1bp to 4.295 and the 30yr +1bp to 4.479.
- The Dec’24 10Y futures traded in a very tight range, oscillating around 110-14 with little movement and low volumes.
- Tonight’s data sees the release of the S&P Global US Services PMI, ISM Services Index / Prices Paid / Employment and New Orders and Mortgage Applications.
