US TSYS: Marginally Cheaper Start
Cash tsys have opened 0.5-1bp cheaper across the major benchmarks on Tuesday. Asia-Pac participants have faded yesterday's richening, perhaps focusing on Tuesday US housing data in early dealing. TYU3 deals at 113-09, -0-01, a touch off the bottom of the observed 0-03+ range.
- A thin docket in Asia today leaves participants on headline watch.
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US TSYS: Richer Start
Cash tsys have opened dealing 1-2bps richer across the major benchmarks. The continued impasse over the US debt ceiling has helped tsys firm on Monday, there was no breakthrough in talks over the weekend and President Biden and House Leader McCarthy are scheduled to meet today. TYM3 deals at 113-23, +0-05+ a touch off the top of the observed 0-05+ range.
- LPR fixings from China are the highlight of today's Asia-Pac session, no change is expected and these cross in just over one hour.
AUD: AUD/EUR: Consolidating In Narrow Range Above 20-Day EMA
After meeting resistance ahead of €0.62 in early May the 20-Day EMA provided support to AUD/EUR. The pair has consolidated in a narrow range in recent dealing.
- The pair is holding its early month gains and sits up ~2% in May. We last print at €0.6145/50.
- Bulls now target a break of €0.6197 the high from 10 May, which opens up the 200-Day EMA (€0.6350).
- The 20-Day EMA (€0.6128) is the first downside target for bears, a break through here opens year to date lows at €0.5959.
- There is a thin docket today, Australian and European PMIs print tomorrow in the next risk events for the pair.
JGBS: Steady, Light Local Calendar, US Debt Ceiling Impasse
In post-Tokyo trade, JGB futures are steady, closing +4 compared to settlement levels, after US tsys traded cheaper before the weekend. Optimism about a debt ceiling deal was dampened when GOP negotiators walked out of talks, causing a risk-off decline in US tsy yields. Yields had pushed to their highest levels since mid-March in early NY trade, continuing the trend from last week.
- Debt ceiling talks overshadowed comments by Fed Chair Powell, suggesting a potential pause at the upcoming June FOMC meeting.
- According to a Bloomberg article, investment trusts have turned from a major seller to a record buyer of JGB futures. Receding bets on more central bank policy shifts have taken the pressure off a once-beleaguered market. (link)
- Core Machine Orders from March is the only data scheduled to cross today, a Y/Y rise of 1.4% is expected.
- The economic data highlight this week will be the timelier Tokyo May CPI on Friday. Recent national figures indicated that Japan's prices picked up in April after a period of cooling earlier in the year. If inflation continues to remain persistent, it could potentially lead to a shift in the BoJ’s YCC stance.
