JGBS: Futures Weaker Overnight, Heavy Session For US Tsys Ahead Of NFP
Jun-05 23:35
In post-Tokyo trade, JGB futures closed weaker, -24 compared to settlement levels, after a heavy session for US tsys on Thursday.
- After gapping higher early Thursday, US tsys finished cheaper and at/near late session lows as markets absorbed a raft of trade-related headline risk. Higher labour costs added to the pressure.
- Unit labour costs (ULCs) were revised substantially higher in the Bureau of Labour Statistics' Q1 final release, rising 6.6% Q/Q SAAR (rev from 5.7% prelim, and up from 3.8% prior).
- Initial jobless claims unexpectedly rose last week, rising to 247k (235k expected) from 239k (rev from 240k) prior.
- US nonfarm payrolls, due later today, are seen increasing a seasonally adjusted 126k in May in the Bloomberg survey after a stronger-than-expected 177k in April (albeit one that was more than offset by negative revisions). The unemployment rate is widely expected to round to 4.2% again. Average hourly earnings are seen rising 0.3% M/M after a softer than expected 0.17% M/M in April, with the workweek watched after a recent recovery from January’s adverse weather lows. (See MNI US Payrolls Preview here)
- Household spending decreased 0.1% y/y in April versus expectations of +1.5%.
- Today, the local calendar will also see Coincident/Leading Index data.
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AUSSIE BONDS: Richer With US Tsys, Risk-On After US-CH H/Ls
May-06 23:32
ACGBs (YM +3.0 & XM +2.5) are stronger after US tsys ended mostly richer, reacting to a strong 10-Year note auction. The move was generally across the board, resulting in the yield curve being relatively unchanged (2s10s +0.08 at 50.773).
- After the US close, risk appetite is firmer post-headlines of US-China officials to meet this week to discuss trade issues.
- The FOMC today will be watched closely, MNI Economist - "The FOMC will extend its series of rate holds to a third meeting in May, keeping the Fed funds target rate at 4.25-4.50% while maintaining its forward guidance in the Statement."
- Cash ACGBs are 2-3bps richer with the AU-US 10-year yield differential at +2bps.
- The bills strip has bull-flattened, with pricing flat to +4.
- RBA-dated OIS pricing is slightly softer across meetings today. A 50bp rate cut in May is given a 4% probability, with a cumulative 103bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Today, the local calendar will see Foreign Reserves data.
- The AOFM plans to sell A$1000mn of the 3.75% 21 April 2037 bond today and A$700mn of the 2.75% 21 November 2029 bond on Friday.
JGBS: Trading To Resume After Long Weekend
May-06 23:20
In post-Tokyo trade on Friday, JGB futures closed weaker, -15 compared to settlement levels. The local market was closed on Monday and Tuesday this week.
- Overnight, US tsys ended mostly richer, reacting to a strong 10-Year note auction. The move was generally across the board.
- After the US close, risk appetite is firmer post-headlines of US-China officials to meet this week to discuss trade issues. From our policy team: US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with China's "lead representative on economic matters" later this week in Switzerland, according to statements released Tuesday.
- Further headlines have crossed from Bessent stating they will meet with Chinese officials this Saturday and Sunday. US equity futures have firmed, Eminis up by around 0.70%, while Nasdaq futures are +1.00% higher.
- "The Bank of Japan will begin its own corporate wage survey. As the Bank of Japan aims to realize a virtuous cycle in which wages and prices rise together, there is a strong concern that wage increases at small and medium-sized enterprises that do not have labor unions and are not included in the Rengo survey are weak." - Kyodo News via BBG
- Today, the local calendar will see Jibun Bank Composite & Services PMIs alongside BoJ Rinban Operations covering 1-5-year and 25-year+ JGBs.
CROSS ASSET: Risk Appetite Firms on US-China Trade Talk Headlines
May-06 23:09
Risk appetite is firmer post headlines of US-China officials to meet this week to discuss trade issues.
- From our policy team: US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with China's "lead representative on economic matters" later this week in Switzerland, according to statements released Tuesday.
- Further headlines have crossed from Bessent stating they will meet with China officials this Saturday and Sunday
- US equity futures have firmed, Eminis up by around 0.70%, while Nasdaq futures are +1.00% higher. For Eminis we are still sub recent highs of 5725, last near 5665.
- In the FX space, yen is off around 0.55%, last near 143.25/30, while USD/CHF is up by a similar amount, tracking to 0.8260. AUD and NZD are outperforming, more so the AUD, which was last 0.6510/15. NZD/USD is close to 0.6015, just off session highs at 0.6022. NZD did rise as well on NZ jobs figures, which showed a slightly lower than expected jobless rate, but follow through is limited. USD/CNH is back close to 7.1950, up around 0.20% in CNH terms.
- In commodities, gold is off 1.5%, but remains elevated near $3400.
- Oil is 0.65% firmer for WTI, building on yesterday's +3.4% rise.
