JGBS: Long End Rally Strongly After 40Y Auction
Mar-27 04:53
JGB futures are holding an uptick, +2 compared to the settlement levels, after reversing strength seen in the aftermath of today’s strong 40-year auction.
- Today's supply was met with strong demand, with the actual high yield coming in at 2.71%, notably below dealer expectations (Bloomberg poll) of 2.79%.
- The auction’s cover ratio also improved to 2.9203x from 2.7518x at the previous outing. Notably, the current 40-year auction yield was ~40bps higher than the previous auction, just shy of the cyclical high of 3.01%.
- Cash US tsys are flat to 2bps richer, with a steepening bias, in today's Asia-Pac session. Aftermarket, US President Trump signed an executive order to place 25% tariffs on US auto imports. US initial jobless claims and GDP data due on Thursday are likely to provide more clues to investors on the Federal Reserve's interest-rate path. Fed Speak from Barkin and Collins is also due.
- Cash JGBs are little changed across benchmarks out to the 10-year but 2-8bps richer beyond, with the 40-year leading.
- Swaps have bull-flattened, with rates 1-4bps lower. Swap spreads are mixed.
- Tomorrow, the local calendar will see Tokyo CPI alongside BoJ Rinban Operations covering 3-25-year JGBs.
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AUSSIE BONDS: Richer & At Session Highs Ahead Of CPI Monthly Tomorrow
Feb-25 04:43
ACGBs (YM +4.0 & XM +3.5) are stronger and at Sydney session highs.
- Today, the local calendar has been light.
- Australian consumer confidence strengthened last week to mark its highest level since May 2022 as households cheered the RBA's first rate cut since the pandemic, according to ANZ and Roy Morgan Research.
- Cash US tsys are 2-3bps richer in today’s Asia-Pac session after yesterday’s gains.
- Cash ACGBs are 4bps richer with the AU-US 10-year yield differential at +2bps.
- Swap rates are 4bps lower.
- The bills strip has bull-flattened, with pricing flat to +5.
- Tomorrow, the local calendar will see January's CPI Monthly and Q4 Construction Work Done. The market expects Headline CPI to increase from 2.5% y/y to 2.6% y/y.
- The AOFM plans to sell A$800mn of the 3.75% 21 April 2037 bond tomorrow and A$700mn of the 1.75% 21 November 2032 bond on Friday.
CNH: Holding Near 100-day EMA Resistance, Vol & RR Levels Within Recent Ranges
Feb-25 03:52
USD/CNH remains sub 7.2600, but dips back towards 7.2500 have been supported so far today. Current levels are close to the 100-day EMA, which we have been sub since late last week. Earlier highs of 7.2630 couldn't be sustained.
- The weakness in onshore equities is likely not helping CNH, although the currency didn't follow the recent strong outperformance theme in local equities relative to the rest of the world.
- Some nervousness may be creeping into markets given some of the negative news flow around US/China trade/tariff related issues. We have heard the US pressing Mexico to impose tariffs on China imports, potential levies on China ships, investment curbs from China into key sectors like tech in the US, and a potential ramping up/tightening of semiconductors curbs that the Biden administration put in place (limiting chip exports from the US to China).
- These developments follow last week's remarks from US President Trump that a trade deal with China was possible.
- The USD/CNY fixing also edged to fresh highs since January.
- For USD/CNH sentiment in the implied vol space remains fairly benign though. 1 month implied vol levels hold close to recent lows, last near 4.52%. In the risk reversal space, the 1 month is up from recent lows sub -0.5000, but at -0.28 is still well off recent cycle highs.
BONDS: NZGBS: Closed Richer But Underperformed US Tsys
Feb-25 03:51
NZGBs closed at session bests, with benchmark yields 3-4bps lower.
- With the local calendar light, today’s strength appears tied to cash US tsys, which are 2-3bps richer in today’s Asia-Pac session after yesterday’s gains.
- Nevertheless, NZGBs have underperformed US tsys, with the NZ-US 10-year yield differential ~2bps wider versus yesterday’s close.
- Swap rates closed 3-4bps lower, with implied swap spreads little changed.
- RBNZ-dated OIS pricing is slightly firmer across meetings today, holding 1bp softer to 7bps firmer than last Wednesday’s pre-RBNZ policy decision levels. Currently, 26bps of easing is priced for April, with a total of 58bps expected by November 2025.
- Tomorrow, the local calendar will see NZ Treasury Chief Economic Adviser Dominick Stephens deliver a presentation on the State of the Economy.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$225mn of the 3.50% Apr-33 bond and NZ$50mn of the 1.75% May-41 bond.
