ASIA STOCKS: Most Markets Higher, Japan Still Outperforming
Regional Asia Pac equities are mostly tracking higher so far in Thursday trade, although continued outperformance from Japan stocks remain a highlight. These moves follow broad based cash gains in Wednesday US trade. US futures are up modestly so far, led by the tech side, while EU equity futures are showing a +1.3% gain at this stage. Positive tones around US-EU and US-China trade talks has aided broader sentiment over the past 24 hours (in the aftermath of the 15% tariff deal with Japan).
- Japan benchmark indices are up around 1.6% at this stage. This puts the Topix not too far from the 3000 level, and have already hit fresh record highs today. The auto sub index is up close to 1.10%, so lagging the broader market gain, but this follows a +10% rise yesterday. Bank stocks have risen today, the index up 3.3%, amid hopes the trade deal may enable the BoJ to tighten policy before year end.
- Elsewhere Hong Kong and China markets remain firmer. The CSI 300 is near 4140, just short of recent highs, the HSI was tracking towards 25690, fresh highs back to 2021.
- South Korean and Taiwan markets are up more modestly. Tsy Secretary Bessent won't attend the next round of trade talks with South Korea due to a scheduling conflict. Still other talks will happen, while onshore media in South Korea says the authorities will propose $100bn of investments into the US to achieve a trade deal. The Kospi is struggling above 3200, while the Taiex was last up 0.30%.
- In SEA, Indonesian stocks are outperforming, up over 1%, while Thailand's benchmark is down modestly, after strong gains yesterday.
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US TSYS: Asia Wrap - Yields Edge Lower
The TYU5 range has been 111-06 to 111.10+ during the Asia-Pacific session. It last changed hands at 111-09+, down 0-05 from the previous close.
- The US 2-year yield has edged lower trading around 3.85%, down 0.01 from its close.
- The US 10-year yield has edged lower trading around 4.34%, down 0.01 from its close.
- (Bloomberg) -- “There's also the likelihood that bonds need to hear a dovish tone from Fed Chair Powell before they can make serious gains. Powell’s two days of Congressional testimony starts in the US session later today and he will be grilled about the potential for interest-rate cuts as soon as July”
- Bob Elliott on X: “A Broad Slowdown In US Hard Data. In recent weeks hard data across nearly every sector of the US economy has shown slowing, suggesting a broad-based weakness that is far from priced into current market expectations.”
- The 10-year yield attempted to break below its 4.30% support overnight, it failed on its first attempt but a sustained move back below there would likely see the move pick up momentum. 10-year yields would need to get back above 4.45/4.50% again to alleviate this downward pressure.
- Data/Events: Philadelphia Fed Non-Man Activity, Current Account Balance, FHFA House Price Index
JGBS AUCTION: Mixed Demand Metrics For 20Y Auction
The 20-year JGB auction delivered mixed results across key metrics. The low price underperformed dealer forecasts, which were set at 100.50 according to a Bloomberg poll. However, the cover ratio increased to 3.1007x (highest since March) from 2.5007x in the previous auction, and the auction tail shortened dramatically to 0.28 from 1.14 – the longest since 1987.
- As noted in the auction preview, today’s offering featured an outright yield approximately 10bps below last month’s level and 25bps below the cycle high.
- However, the 10/20 yield curve remained near its recent high, its steepest since 1999.
- Overall, today’s result is likely to be seen as better than the performance observed in the 30-year JGB auction earlier this month.
- Post-auction, the 20-year JGB has cheapened 1bp.
JGBS AUCTION: 20-Year JGB Auction Results
The Japanese Ministry of Finance (MOF) sells Y 758.6bn 20-Year JGBs:
- Average Yield: 2.364% (prev. 2.453%)
- Average Price: 100.48 (prev. 99.29)
- High Yield: 2.385% (prev. 2.540%)
- Low price: 100.20 (prev. 98.15)
- % Allotted At High Yield: 20.7575% (prev. 80.8791%)
- Bid/Cover: 3.1007x (prev. 2.5007x)
