KRW: Won Dips As Equity Outflows Resume
Spot USD/KRW is back to levels where we started the week, around 1293. The resumption of net equity outflows, as the equity rebound falters, appear to be the main drivers.
- The Kospi is off by 1.7%, with offshore investors selling $233.6mn of local shares so far today. Week to date net outflows are now back to -$245mn.
- Indeed, in June to date, net equity flows have only been positive on 3 out of 19 possible sessions.
- Regional tech leads are also weighing, with the Taiex down 1.2% led by semiconductors today, while the HSI tech sub index is off by over 2%.
- USD/KRW has bounced off the 1280 level on several occasions this week and this was also a support zone back in mid-June. On the topside, expect to see official rhetoric rise on any breach of 1300.
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JGBS: Futures Tick Lower, Cash Tight
Cash JGBs were little changed across the curve during Tokyo morning trade, sitting within -/+0.5bp boundaries vs. Friday’s closing levels come the lunch break. Meanwhile, JGB futures nudged lower during the Tokyo morning as domestic equities firmed on the wider global impetus, with the former unwinding its modest overnight gains to hit the bell 2 ticks below Friday’s settlement levels.
- Comments from Japanese PM Kishida & BoJ Governor Kuroda failed to unveil any fresh, market-moving information.
- Offer to cover ratios for today’s Rinban operations were as follows:
- 3- to 5-Year: 2.28x (prev. 2.45x)
- 5- to 10-Year: 2.67x (prev. 1.95x)
- 25+-Year: 4.38x (prev. 5.00x)
- We wouldn’t expect there to be much in the way meaningful impact for JGBs on the back of these cover ratios.
AUSTRALIA: New Liberal-National Coalition Leaders Elected
Peter Dutton takes the helm of the Liberal Party, while David Littleproud becomes the chief of the Nationals in the wake of leadership polls in two constituent parties of the Liberal-National Coalition.
- The ballots were held after the Coalition's poor performance in Australia's federal election, which saw Scott Morrison's administration replaced by a Labour government. The Coalition is looking at a seriously reduced parliamentary representation, likely to just 58 or 59 seats, due to heavy losses suffered by the Liberals.
- Peter Dutton is replacing Scott Morrison as Liberals' leader after running unopposed, with Sussan Ley set to become his deputy after another uncontested vote. Associated with the conservative wing of the party, Dutton promised to bring different factions together.
- David Littleproud beat incumbent Barnaby Joyce and Darren Chester in a three-way race for National Party leadership. The election took more than two hours, one Sky News reported flagged the possibility of an initial tie between Littleproud and Joyce. NSW Senator Perin Davey will serve as Littleproud's deputy.
US TSYS: Futures Hold Tight, Even As Wider Risk Sentiment Improves
Tsy futures are still not fussed as gains in the Hang Seng accelerate to over 2.0%, while e-minis sit ~0.7% higher on the session. The lack of cash Tsy trade and general liquidity owing to the observance of the Memorial Day holiday will be a factor here, but even so, the 0-03 range observed in TYU2 futures is extremely tight. The contract last deals +0-01+ at 120-06.
