AUSSIE BONDS: Modestly Stronger, Narrow Ranges, Light Local Calendar
Mar-14 01:48
In roll-impacted trading, ACGBs (YMM5 +2.0 & XMM5 +1.5 ) are modestly stronger with narrow ranges on a data-light session. The next event on the local calendar is Sarah Hunter's, Assistant Governor (Economic) speech at the AFR Banking Summit on Tuesday.
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s modest rally. Yesterday, US tsys were supported by risk-off amid ongoing trade war uncertainty.
- However, today US equity futures are higher with US Government shutdown odds seemingly falling. Rtrs noted: "Top U.S. Senate Democrat Chuck Schumer told colleagues behind closed doors on Thursday that he would vote to advance a stopgap funding bill, signaling that his party would provide the votes to avert a government shutdown, Punchbowl News reported, citing Democratic aides and lawmakers.".
- Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at +12bps.
- Swap rates are flat to 3bps lower, with the 3s10s curve flatter.
- The bills strip is +2 beyond the first contract.
- RBA-dated OIS pricing is flat to 4bps softer across meetings today. A 25bp rate cut in April is given an 8% probability, with a cumulative 67bps of easing priced by year-end (based on an effective cash rate of 4.09%).
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FOREX: Yen Weakness Continues, Steady Trends Elsewhere
Feb-12 01:37
G10 focus remains centred on yen weakness. USD/JPY has risen back above 153.40 (session highs 153.46). This has been enough to push USD indices higher, the USD BBDXY last near 1301.7. There has been little aggregate shifts elsewhere in the G10 space.
- USD/JPY opened near 152.50, so is nearly 100pips higher versus these levels. We noted earlier the higher core backdrop from Tuesday was a yen headwind, although US yields sit down slightly for Wednesday trade so far.
- Hong Kong equity sentiment has opened up firmer, but trends are mixed elsewhere, while US futures aren't too far away from flat.
- BoJ Governor Ueda is before parliament at the moment, but hasn't delivered any market moving headlines so far.
- Yen weakness is driving crosses higher. AUD/JPY is back above 96.50, close to early Feb highs. EUR/JPY is closing in on 159.00
- For USD/JPY technicals, we are back close to the 100-day EMA, but the 50-day (around 154.70) is seen as more important resistance.
- AUD/USD was last near 0.6295, little changed, while NZD/USD has ticked up towards 0.5660.
- We had housing finance figures for Australia earlier, which continued to rise, but hasn't impacted FX sentiment.
- Later on we get preliminary Japan machine tool orders, but greater focus will rest with tonight's US CPI print.
JGBS: Mostly Cheaper Led By 10Y, BoJ Gov Ueda Reiterates Rhetoric
Feb-12 01:33
In Tokyo morning trade, JGB futures are weaker, -9 compared to settlement levels.
- BoJ Governor Ueda reiterated that the central bank will implement appropriate policy to achieve its price target, aligning with recent rhetoric. His remarks were made in response to a question in Parliament.
- M2 & M3 stock rose 1.3% y/y and 0.8% y/y respectively in January.
- “The 1.5% Japan government bond set to mature in March 2034 is cheapest against its peers, according to a Bloomberg analysis that interpolates against a curve.”
- Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after yesterday’s modest sell-off.
- Cash JGBs are 1bp richer to 1bp cheaper across benchmarks, with the 10-year underperforming. The benchmark 10-year yield is 1.5bps higher at 1.332% after making a fresh cycle high of 1.337% today.
- There is 10-year linker supply due today.
- The swaps cure has twist-steepened, with rates 1bp lower to 1bp higher. Swap spreads are tighter.
CHINA: Central Bank Drains Liquidity via OMO.
Feb-12 01:30
- The PBOC issued CNY558bn of 7-day reverse repo at 1.50% in this morning’s operations.
- Total maturities today CNY697bn
- Net liquidity withdrawal CNY139bn.
- The PBOC controls and maintains liquidity in the interbank market through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Index continues to decline down to 1.74%, from 1.90% yesterday.
- China overnight interbank rates are up to 1.84% from 1.50% yesterday.
- China 7-day interbank rates are down to 1.86% from 1.88% yesterday.
