SOUTH KOREA: Korean update Swaps Pricing  Vs. Pre-BOK Meeting Levels

NZGB yields have seen a steeper bias through Tuesday trade. 10 to 30yr yield tenors are up a little over 4bps, while the 2yr is up less than 1bps. This leaves the 2/10s curve close to +143bps, which is highs back to April of this year. This looks to the playing some catch up with US moves, with the 2/10s Tsy curve just off late August highs. 

• The outright 2yr yield remains sub 3.00%, while the 10yr yield is around 4.40%. The 2yr swap rate has risen around 2bps to be near 2.76% in latest dealings.
• US Tsy yields have re-opened, with yields pushing higher across the curve, albeit with gains in the 1-1.5bps region at this stage.
• In terms of data, NZ saw the largest improvement in the merchandise terms of trade in Q2 since Q1 2024. It rose 4.1% q/q, the sixth consecutive quarterly increase, to be up 12.2% y/y after 10.3% y/y in Q1. While domestic demand remains soft, this rise in the terms of trade will be providing some welcome support to growth.
• Via BBG: " The data inflow has improved at the margin over the past fortnight signaling better times ahead, but current economic activity is soft, the Treasury Dept. says in its Fortnightly Economic Update published Tuesday in Wellington."
• Tomorrow, the data calendar sees ANZ commodity prices for August. 

The Japanese Ministry of Finance (MoF) sells Y 2.0206trln 10-Year JGBs:

• Average Yield: 1.6120% (prev. 1.462%)
• Average Price: 99.05 (prev. 100.32)
• High Yield: 1.6190% (prev. 1.479%)
• Low price: 98.99 (prev. 100.18)
• % Allotted At High Yield: 17.534% (prev. 86.7516%)
• Bid/Cover: 3.92 (prev. 3.0592x)

President Trump is potentially about to declare a national housing emergency, why is this ? Below are some excerpts related to the overnight announcement: 

• US (MNI): Trump May Declare National Housing Emergency In Fall - Bessent. US Treasury Secretary Scott Bessent told the Washington Examiner that President Donald Trump may declare a 'national housing emergency' this fall to address rising house prices. The Washington Examiner notes that there hasn't been a national housing emergency declared since the 2008 recession.
• John Wake on X: "Homebuilder inventory hits 2009 levels". https://t.co/FIEJgJSKnx. See Graph Below.
• Bob Elliott on X: ”Low activity and falling prices suggests the housing market is cracking at this point.”
• EndGame Macro on X: “We’re now back to the highest level of completed but unsold homes since 2009. Historically, when completed inventory rises this sharply, it’s a sign that demand is failing to keep pace. Builders don’t like to sit on finished product because every unsold house ties up capital and financing costs. The last time we saw this dynamic in 2006–2009, the oversupply collided with weakening demand and set up a multi year price correction.”
• “Based on historical precedent, inventories at this level almost always mark the start of builders offering discounts, incentives, and eventually price cuts to clear supply. In 2009, unsold inventory peaked just before the steepest leg down in home values. Today isn’t identical, credit quality is stronger, but debt loads, economic strain, and demographic headwinds point to the same pressure.”
• “Going forward, the most likely scenario is a correction, not a rebound. Housing cycles take years to play out, and this chart suggests we’re entering the phase where supply begins to overwhelm demand.” See Graph below.
• Thomas Thornton on X: “Either prices are too high or rates are too high.  Lower rates artificially and will see higher home prices.  You want both lower at the same time, let a recession happen.”

Fig 1: Number of Unsold Completed Homes For Sale

Source: MNI - Market News/@JohnWake