MNI EUROPEAN OPEN: Post-Election JGB Yield Fall Extends

Feb-10 05:14By: Gavin Stacey

Europe

EXECUTIVE SUMMARY

KEIR STARMER SECURED THE PUBLIC SUPPORT OF EVERY CABINET MINISTER - BBG
PRESIDENT DONALD TRUMP’S TRADE WARS ARE CONTRIBUTING TO UK INFLATION, ACCORDING TO BANK OF ENGLAND MANN - BBG
SECRETARY OF STATE MARCO RUBIO WILL PARTICIPATE IN THE MUNICH SECURITY CONFERENCE - BBG
WEDNESDAY SEES AN UNUSUAL BLS NONFARM PAYROLLS REPORT AFTER LAST WEEK’S GOVERNMENT SHUTDOWN - MNI
PRESIDENT TRUMP: THE FEDERAL RESERVE, KEVIN WARSH, CAN STOKE THE ECONOMY TO GROW AT A RATE OF 15% IF CONFIRMED - BBG

Fig 1: Rise In Longer-dated JGB Yields Unwinds Further

Source: MNI - Market News/Bloomberg Finance L.P.

POLITICS (BBG): “Keir Starmer secured the public support of every cabinet minister, including potential rivals, after delivering a passionate speech to MPs. Starmer's position as UK prime minister was under threat due to his controversial appointment of Peter Mandelson as Britain's US ambassador, but he appears to be safe in the immediate term.”

FX (BBG): “Hedge funds are betting on more pound weakness as Keir Starmer's position as UK Prime Minister looks increasingly shaky. Sterling fell to its weakest since Jan. 21, as the UK political crisis deepened with the departure of key aides and Starmer faced calls to resign.”

MACRO (BBG): “President Donald Trump’s trade wars are contributing to UK inflation as China raises prices on exports to Britain to recover the cost of US tariffs, according to Bank of England policymaker Catherine Mann. Mann said prices going into the US market have fallen and prices going into other markets have increased, citing evidence in the trade data.

POLITICS (BBG): “Secretary of State Marco Rubio will participate in the Munich Security Conference and meetings with counterparts in Europe. Rubio will travel to Bratislava, Slovakia, to advance regional security interests and discuss issues like nuclear energy and NATO commitments. Rubio will visit Budapest, Hungary, to meet with key officials and bolster US bilateral and regional interests, including the commitment to peace processes.

ECB (MNI): Bank Of France Gov. Villeroy To Steps Down Early: Bank of France Governor Francois Villeroy will step down in June, 20 months ahead of the expiry of his mandate. Sources said that Villeroy had been planning to leave the Bank of France before the end on his mandate in October 2027 and that the decision to leave avoided the possibility of his successor being chosen by a future right-wing French president.

MACRO (MNI): MNI US Payrolls Preview: Watch The Forest, Not Just The Trees: Wednesday sees an unusual BLS nonfarm payrolls report after a brief delay following last week’s government shutdown, with January details released at 0830ET. The report will need to be assessed holistically rather than focusing on any single number, although the unemployment rate should offer the cleanest single take. Consensus looks for a circa 70k increase in nonfarm payrolls coming almost entirely from private payrolls.

MACRO (BBG) “President Donald Trump said his pick to lead the Federal Reserve, Kevin Warsh, can stoke the economy to grow at a rate of 15% if confirmed to the role. Trump said Warsh was the “runner up” in his last search and that it was a big mistake to pick Fed chair Jerome Powell, who was pushed by former Treasury Secretary Steven Mnuchin. Trump's comments suggest he is betting that Warsh can fuel the economy ahead of midterm elections, but Warsh's Senate confirmation may be delayed due to a Justice Department probe and a Fed building renovation project.”

FED (MNI BRIEF): Tariff Revenues Lower US Neutral Rate - Fed's Miran: Federal Reserve Governor Stephen Miran said Monday U.S. tariff revenues lower the neutral rate of interest by bringing down the budget deficit.

JAPAN

MACRO (BBG): “Japanese Prime Minister Sanae Takaichi will not change her stance that the sales tax cut for food will end after two years, Finance Minister Satsuki Katayama tells reporters. Takaichi has made it clear that the tax cut is strictly limited to two years, will not rely on debt issuance and will apply only to food and beverages, Katayama says.

OTHER

GOLD/SILVER (BBG): “Gold and silver prices plunged after President Donald Trump nominated former Federal Reserve governor Kevin Warsh to replace outgoing Fed Chair Jerome Powell, as investors were expecting a more dovish appointment. The selloff, which saw silver drop 30% and gold tumble 11% on Jan. 30, may have been healthy to remove some froth from the market, given the speed and magnitude of the metals' gains in the preceding months.”

AUSTRALIA (BBG): “Australia’s consumer sentiment slipped in February after the Reserve Bank hiked its key interest rate to tame inflation. The sentiment fell to 90.5 points, with pessimists outweighing optimists, according to a Westpac Banking Corp. survey. A separate survey from National Australia Bank Ltd. showed business conditions declined while confidence remained below its long-run average.”

BITCOIN (BBG): “Bitcoin was trading on either side of $70,000 on Monday following a roller-coaster ride at the end of last week. Traders remain on edge as cryptocurrencies need bullish momentum, which is still lacking despite the recovery last week. US Bitcoin exchange-traded funds recorded inflows of $221 million on Feb. 6 as investors sought to buy the dip following the market’s dizzying selloff.”

CHINA

YUAN (BBG): "The yuan surged to its strongest level since May 2023 after China was said to have asked banks to limit their holdings of US Treasuries."

ECONOMY (YICAI): "Yicai’s China Chief Economists Confidence Index fell to 50.2 in February, slipping from 50.32 the prior month but staying above the 50 boom-bust line for seven straight months."

MNI: PBOC Net Injects CNY205.9 Bln via OMO Tuesday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY311.4 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY205.9 billion after offsetting the maturity of CNY105.5 billion today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5218% at 10:26 am local time from the close of 1.5385% on Monday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 55 on Monday, compared with the close of 50 on Friday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 6.9458 Tues; +4.86% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.9458 on Tuesday, compared with 6.9523 set on Monday. The fixing was estimated at 6.9142 by Bloomberg survey today.

MARKET DATA

JAPAN JAN MONEY STOCK M2 YOY 1.6%; 1.7% PRIOR

JAPAN JAN MONEY STOCK M3 YOY 1.0%; 1.1% PRIOR

JAPAN JAN P MACHINE TOOL ORDERS; 10.9% PRIOR

AUSTRALIA WBC CONSUMER CONFIDENCE MOM -2.6%; -1.7% PRIOR

AUSTRALIA NAB BUSINESS CONFIDENCE 3; 2 PRIOR REVISED

AUSTRALIA NAB BUSINESS CONDITIONS 7; 9 PRIOR

MARKETS

US TSYS: USTs Take Lead from JGBs, Yields Below Mid Point of 1M Range

USTs have followed the lead of JGBs in thin markets with gains Tuesday ahead of the NFP. Yields are down 1-2bps across the curve with curve movement limited. Bond futures' moves are muted with the 10-Yr up +02 at 112-08.

The 2-Yr is down -1.2bps at 3.477%
The 5-Yr is down -1.4bps at 3.732%
The 10-Yr is down -1.6bps at 4.188%
The 30-Yr is down -1.9bps at 4.841%

Ahead of the NFP markets get the ADP employment change (prior 7.750k), import / export price index (useful guide for future inflation expectations) and retail sales.

There is a US$90bn 6-week bill auction and a US$58bn 3-Yr bond auction tonight as key focus. Bid to cover on last 3-Yr auction was 2.65x

US yields have shown sensitivity to jobs data of late, making this week's NFP an increasingly important release for the next catalyst for yields.

JGBS: Unwinding Of Post-Election Sell-Off Continues

JGB futures are stronger, +43 compared to settlement levels, and at session bests on a data-light day.

Cash US tsys are 1-2bps richer, with a flattening bias, in today's Asia-Pac session.
Wednesday sees an unusual BLS nonfarm payrolls report after a brief delay following last week's government shutdown, with January details released at 0830ET. The report will need to be assessed holistically rather than focusing on any single number, although the unemployment rate should offer the cleanest single take. Consensus looks for a circa 70k increase in nonfarm payrolls coming almost entirely from private payrolls. (See MNI US Payroll Preview here)
The local calendar will also see Machine Tool Orders data later.
"Japanese bonds are performing better than feared by some investors after the elections, partly because there is a delay to the sales tax cut, which had been flagged ahead of the vote." - BBG
Cash JGBs are 2-4bps richer across benchmarks, with the futures-linked 7-year once again leading. The benchmark 10-year yield is 2.8bps lower at 2.261% versus the cycle high of 2.359%.
Swap rates are flat to 2bp richer, with a flattening bias.
Tomorrow, the local calendar will see PPI and Tokyo Avg Office Vacancies data.

AUSSIE BONDS: Richer After Declines In Confidence, Strong May-41 Auction

ACGBs (YM +3.5 & XM +5.0) are stronger and at session highs after today’s confidence data drop.

Australia’s Westpac consumer sentiment slipped in February after the RBA hiked its key interest rate to tame inflation. The sentiment fell to 90.5 points, with pessimists outweighing optimists. A separate survey from NAB showed business conditions declined while confidence remained below its long-run average.
Cash US tsys are 1-2bps richer, with a flattening bias, in today's Asia-Pac session.
Cash ACGBs are 4-5bps richer with the AU-US 10-year yield differential at +63bps.
The latest ACGB May-41 supply auction continued the recent trend of firm pricing, with the weighted average yield printing 0.81bps through prevailing mids. Moreover, the cover ratio increased to 4.9500x from 3.2500x at the prior outing.
The AOFM also plans to sell A$700mn of the 3.75% 21 April 2037 bond on Wednesday and A$1000mn of the 2.50% 21 May 2030 bond on Friday.
The bills strip has bull-flattened, with pricing flat to +5.
RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 14% for March to 91% by June and 151% by December 2026.
Tomorrow, the local calendar will see Home Loan data alongside RBA's Hauser-Fireside Chat.

Bloomberg Finance LP

BONDS: NZGBS: Subdued Trading, Underperforms $-Bloc Markets

NZGBs closed slightly richer across benchmarks after a subdued data-light session.

NZGBs did, however, underperform their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials 3-4bps wider.
Cash US tsys are 1-2bps richer, with a flattening bias, in today's Asia-Pac session.
(MT Newswires) NZ’s total new lending increased to NZ$20.1 billion in December 2025 from NZ$12.79 billion in November 2025, according to RBNZ data.
Swap rates closed little changed.
RBNZ-dated OIS pricing closed little changed across meetings. No tightening is priced for February, while December 2026 assigns 44bps.
Tomorrow, the local calendar will be empty. The local calendar will be light until Friday's release of BusinessNZ Manufacturing PMI, Net Migration and RBNZ Inflation Expectation data.
On Thursday, the NZ Treasury plans to sell NZ$250mn of the 1.50% May-31 bond and NZ$200mn of the 4.5% May-35 bond.

Bloomberg Finance LP

FOREX: A$ Backs Away From 0.7100 Test, BBDXY Struggles Amidst Yen Gains

The main focus in the G10 space has been a further retracement in USD/JPY, although higher beta FX has given some of the recent gains seen. AUD and NZD are both down 0.25-0.30%. Some retracement in the precious metals rally has likely been a headwind for both currencies. Gold is down around 0.65%, while silver is off a little over 2.5%. AUD/USD has stopped short of a test above 0.7100, with an option expiry at this figure level for NY cut later as well. AUD/USD was last 0.7070/75, NZD/USD in the 0.6035/40 region. The BBDXY index did try to rally in first part of trade but once USD/JPY rolled over it struggled. We were last 1182.6 for the index, little changed for the session (earlier highs were at 1184.46).

On the data front, the main focus has been on Australian survey measures with both the Westpac consumer sentiment and NAB business surveys released. Consumer sentiment fell, although Westpac noted the response was more muted compared to earlier rate hikes. NAB business conditions eased, but have largely trended sideways since the middle of last year.
Both measures point to some downside risks to growth momentum, but the RBA arguably needs this help bring inflation back into the target band.
US equity futures are a touch softer, while US yields are drifting lower (which has likely help cap USD upside). AUD/JPY is back under 110.00, but still above all key EMAs.
There have been little shifts elsewhere, outside of some weakness in NOK and SEK. EUR/USD has hovered just above 1.1900, while GBP/USD remains sub 1.3700, which capped upside late in Monday trade.
Looking ahead, US retail sales data headlines Tuesday’s calendar, while markets will then swiftly turn their focus to US employment (Wed) and US CPI (Fri).

JPY: USD/JPY Continues To Unwind Pre-Election Rally, Yield Differentials Lower

USD/JPY sit near 155.25/30 in latest dealings, around 0.40% stronger in yen terms for the session so far. Earlier lows were at 155.15. The market continues to fade upticks post the weekend election, with earlier highs today at 156.29. A case of the LDP victory priced into some degree, along with positive soundbites so far from Japan officials, has likely aided the move. The FinMin stating today there is no plans to extend the tax cut beyond two years and that a variety of options are being looked at to fund it (with focus on avoiding fresh JGB issuance).

USD/JPY is back under the 20 and 50-day EMAs, but still above recent lows. 154.55/152.10 the low from Feb 2 and low from Jan 27 (and the bear trigger) are likely to be key downside focus points.
If we can see concerns around the domestic policy outlook in Japan subside further, USD/JPY may realign itself more with yield differentials, which remain in a steep downtrend. The chart below plots USD/JPY versus the US-JP 2yr and 10-yr swap rate differentials.
Helping sentiment for yen at the margins today has also been a softer precious metals backdrop, with gold and silver giving back some of the respective recent gains. AUD and NZD are both off around 0.20-0.25% at this stage. AUD/JPY is back under 110.00, but still above all key EMAs (the 20-day is near 108.11).
Looking ahead, the local data calendar is empty tomorrow. We do have payrolls in the US tomorrow evening, a likely key driver of the near term rates outlook in the US.

Fig 1: USD/JPY Spot Versus US-JP Swap Rate Differentials

Source: Bloomberg Finance L.P./MNI

ASIA STOCKS: Japan Effect Sees Regional Gains, NIFTY 50 Strong Uptrend Building

Stocks in Japan continue to lead today following the election result and optimism over the economy. Investors are pricing in the PMs "Sanaenomics" agenda, which includes a ¥21 trillion stimulus package, potential tax relief (suspending the 8% sales tax on food), and increased defense and AI spending. The ongoing earnings season has exceeded expectations. Heavyweights like SoftBank Group saw shares spike over 10% today after upgrading full-year forecasts. Other major gainers include Furukawa Electric (+22%) and NEC, which announced a significant share buyback. This momentum is supported by structural reforms that have raised Japan's average Return on Equity expectations significantly. This sees the NKY up +2.3% today and nearly 7% in the last three trading days.
The Japan effect lifted regional bourses with all major indexes up . China was more subdued to modest gains as markets start to wind down ahead of the upcoming holidays and the KOSPI rose by just +0.10%.
Despite news that FTSE Russell are following the lead by MSCI, the Jakarta Composite brushed off these further concerns with a second day of gains, up +1.1% today.
India's NIFTY 50 is +0.30% and continues to deliver solid daily gains. Since the announcement of the US trade deal, the NIFTY 50 has gained almost 5% to be near 26,000 again. The bullish momentum is strong for the NIFTY 50 according to the MACD analysis. The short term exponential average is significantly longer than the long term suggesting a strong uptrend is building for the index.

OIL: A Neutral Bias Leaves Oil Exposed to US Iran Headlines

As the planned meeting between President Trump and Israeli PM Netanyahu draws near analysts globally are looking for clues for possible outcomes. The United States and Israel most recently conducted a large-scale bombing campaign against Iran in June 2025, an event often referred to as the Twelve-Day War. Israel stated the strikes were a "last-resort effort" to prevent Iran from acquiring nuclear weapons and to neutralize the threat of annihilation. President Trump stated the intervention was for "collective self-defense" of Israel and to "eliminate Iran's nuclear program" after a 60-day negotiation deadline expired without an agreement.
As of February 2026, Israeli Prime Minister Benjamin Netanyahu's stance is that Israel is prepared to go to war with Iran if it crosses specific "red lines" regarding its nuclear and ballistic missile programs. While he has publicly stated a desire to avoid a "war of attrition," his administration is actively preparing for potential unilateral military action (source Times of Israel)
It is difficult to see compromise coming from the meeting as momentum indicators turn neutral for WTI and Brent at present, making them more vulnerable to geopolitical headlines. US Warships have arrived in the Middle East as a counter to the talks with Tehran, reminding them that military strikes are possible.
WTI has traded in tight range of $63.87 - $64.50 and is down -0.25% today to US$64.20 after strong gains overnight.
Brent has traded in a tight range of $68.44 - $69.07 and is currently at US$68.94bbl, down -0.14%

Gold Lacks Momentum; Gives Back O/N Gains

Despite strong overnight moves, gold gave back some of those in the Asian trading day suggesting that the one way positive bias for the precious metal may not have returned yet.
Different momentum indicators are providing alternate backdrops for gold with the 14-day relative strength relatively neutral whilst the MACD (white line) remains below the Signal (red line) suggesting that downward trend still remains for gold. What this does suggest is that the volatility may still elevated for now, as the market continues to adjust following the volatility.
Gold opened the Asia trading day at US$5,067 and has traded in a range of $4,987 - $5,076. Currently it is at US$5,025 a fall of -0.63%
China's biggest metal miner Zijin Mining, raised its targeted gold output nearly a third by 2028, as prices of the precious metal remain elevated. Mined gold output will rise to between 130 to 140 tons over the next three years, the Fujian-based miner said in exchange filings on Monday. (per BBG)
ETFs have seen a fifth consecutive day of declines in gold and silver holdings as the fall out from recent volatility continues.

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
10/02/2026	0700/0800	**	SE	Private Sector Production m/m
10/02/2026	0700/0800	***	NO	CPI Norway
10/02/2026	1000/1000	**	GB	Gilt Outright Auction Result
10/02/2026	1100/0600	**	US	NFIB Small Business Optimism Index
10/02/2026	1200/0700	**	BR	Brazil Final CPI
10/02/2026	-	***	CN	New Loans
10/02/2026	-	***	CN	Money Supply
10/02/2026	-	***	CN	Social Financing
10/02/2026	1330/0830	***	US	Employment Cost Index
10/02/2026	1330/0830	**	US	Import/Export Price Index
10/02/2026	1330/0830	***	US	Retail Sales
10/02/2026	1330/0830	***	US	Retail Sales
10/02/2026	1355/0855	**	US	Redbook Retail Sales Index
10/02/2026	1500/1000	*	US	Business Inventories
10/02/2026	1500/1000	*	US	Business Inventories
10/02/2026	1700/1200	***	US	USDA Crop Estimates - WASDE
10/02/2026	1700/1200		US	Cleveland Fed's Beth Hammack
10/02/2026	1800/1300		US	Dallas Fed's Lorie Logan
10/02/2026	1800/1300	***	US	US Note 03 Year Treasury Auction Result
11/02/2026	0130/0930	***	CN	CPI
11/02/2026	0130/0930	***	CN	Producer Price Index
11/02/2026	0900/1000	*	IT	Industrial Production
11/02/2026	1020/1120		EU	ECB's Cipollone In Digital Finance Conference Fireside Chat
11/02/2026	1200/0700	**	US	MBA Weekly Applications Index