MNI EXCLUSIVE: Insights On China Copper Demand This Year

ACGBs (YM +7.0 & XM +6.5) are stronger on a local data-light session. 

• The PBoC announced today a cut to the seven-day reverse repurchase rate to 1.4% from 1.5%. The change will come into effect from tomorrow.
• Markets have agonised for some time as to when there would be new measures announced by authorities to support the Chinese economy in a bid to ensure the 5% GDP growth target is achievable in the face of 145% tariffs from the US.
• Cash US tsys have twist-flattened, pivoting at the 20-year, with benchmark yields 2bps higher to 1bp lower.
• 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 6-7bps richer with the AU-US 10-year yield differential at -4bps.
• The bills strip has bull-flattened, with pricing flat to +8.
• RBA-dated OIS pricing is flat to 7bps softer across meetings today. A 50bp rate cut in May is given a 4% probability, with a cumulative 107bps of easing priced by year-end.

AUDUSD rose sharply to a high of 0.6515 following news that trade talks between the US and China would take place on the weekend. It is trading below 65c again though as the US dollar has strengthened (USD BBDXY +0.3%). The pair is now down 0.2% to 0.6483 off the intraday low of 0.6482 unable to find support from stronger equities.

• AUDUSD has had a mixed reaction to China’s announcements today of increased stimulus. It rose above 0.6510 following news of a 10bp cut in the 7-day reverse repo but that was more than unwound soon after.
• Aussie is off its earlier highs against other major currencies but still slightly higher on the day. AUDJPY is up 0.3% to 92.788 off the intraday peak of 93.33, AUDNZD is +0.1% to 1.0814 after falling to 1.0800, AUDEUR is +0.1% to 0.5716 following a high of 0.5752, while AUDGBP is flat at 0.4858.
• Equities are generally stronger with the ASX up 0.2%, Hang Seng +1.5% and S&P e-mini +0.6%. Oil prices are higher with the WTI +0.6% to $59.46/bbl. Copper is down 1.1% though and iron ore is around $99/t after rising above $100 earlier.
• Later the focus will be on the Fed decision, which is widely expected to leave policy unchanged. March German factory orders and euro area retail sales print. 

At the Tokyo lunch break, JGB futures are weaker, -11 compared to the settlement levels. Trading has resumed today after an extended long weekend.

• Cash US tsys have twist-flattened, pivoting at the 20-year, with benchmark yields 2bps higher to 1bp lower.
• Japan's service sector showed a renewed upturn in April with the au Jibun Bank Purchasing Managers' Index rising to 52.4 from March's reading of 50.
• “Barclays pushes out its call for the next rate hike by the Bank of Japan to January 2026 from July 2025. Economists at the U.K. bank's FICC Research cite the BOJ's adjustment of its policy guidance and the reduction in its forecasts, particularly for growth, in the quarterly Outlook Report.” (per DJ via BBG)
• The cash JGB curve has bear-steepened, with yields flat to 5bps higher. The benchmark 10-year yield is 1.5bps higher at 1.279% versus the cycle high of 1.596%.
• Swaps are little changed, with swap spreads mostly wider.