BOJ: On Hold, But 2 Dissents, BoJ Outlines Plans To Sell ETF/J-REIT Holdings
Sep-19 04:20
As expected, the BOJ left rates on hold at 0.50%. Still, this was held by a vote of 7-2 by the board. The two dissenters were board members Takata and Tamura, who both were in favor of raising the policy rate to 0.75%.
- This was the first time we had dissent under Ueda's watch. Takata noted that the inflation target had more or less been achieved, while Tamura indicated that rates should be set closer to neutral. In this sense today's decision may be eyed as a hawkish hold, although we will wait to see what Governor Ueda says later at the press conference.
- On the economy and inflation, the language used by the BOJ didn't suggest a lot had changed around the outlook. Underlying inflation was described as stagnate due to slowing economic but expected to gradually accelerate. The growth outlook was described in a similar fashion. Capex is rising moderately, while consumption has been resilient. Inflation expectations have also risen modestly. It retains the bias to raise rates.
- The other focus point from the meeting was that the central bank will start selling its ETFS and J-REITS, (albeit once it makes the necessary operational preparations). ETFS will be sold at a pace of about ¥330bn per year (this is book value, market value is ¥620bn per BBG). J-REITS at about ¥5bn per year. They will be selling them to the market in amounts broadly equivalent to sales of stocks previously purchased from financial institutions.
- BBG noted: "The BOJ has around 70 trillion yen in ETFs (market value, not book)." So at face value it will take some take considerable time to shrink this part of its balance sheet. The BOJ did note that the future pace of sales may be modified.
- The market reaction has been hawkish, with the 2 dissenting votes a factor. USD/JPY is down around 0.50% to 147.25/30, while JGB futures are down, likewise for local stocks.
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US TSYS: Asia Wrap - Yields Edge A Little Higher In The Front-End
Aug-20 04:16
The TYU5 range has been 111-21 to 111-26 during the Asia-Pacific session. It last changed hands at 111-23+, down 0-01 from the previous close.
- The US 2-year yield has edged higher trading around 3.752%, up 0.01 from its close.
- The US 10-year yield has edged higher trading around 4.308%.
- Yields are still firmly within its wider 4.10%-4.65% range. The 4.35% pivot area in 10-Year yields found solid demand overnight helped by the S&P rating, the market will now be waiting for any clues from Powell's upcoming Jackson Hole speech.
- “TRUMP: EVERY SIGN IS POINTING TO A MAJOR RATE CUT" - BBG
- "Could somebody please inform Jerome “Too Late” Powell that he is hurting the Housing Industry, very badly? People can’t get a mortgage because of him. There is no Inflation, and every sign is pointing to a major Rate Cut. “Too Late” is a disaster!" - (Trump Truth Social Post)
- (Bloomberg) - It’s not the first time that when monetary policy is tweaked in New Zealand, there’s a read across for G-10 peers, especially Treasuries. The RBNZ lowered interest rates as expected, but surprised traders by implying deeper cuts into next year. The resulting yield curve steepening is likely to be replicated by fixed income peers where central banks have an easing bias.
- Data/Events: MBA Mortgage Applications, FOMC Meeting Minutes
Fig 1: 10-Year US Yield 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
CHINA: Bond Futures Up after Another Liquidity Injection
Aug-20 04:11
- China's bond futures are up in this morning's trade after a fourth straight day of liquidity injection during the OMO.
- The 10-year is up +0.05 at 107.985, but remains well below all major moving averages. The nearest above is the 20-day EMA at 108.30.
- The 2-year bond future is up +0.01 to 102.34 nearing the 20-day EMA of 102.35.
- This morning's OMO injected CNY497bn of liquidity via 7-day reverse repo taking the four day tally of injections to CNY1.2bn.
- Bonds yields are edging lower with the CGB10yr at 1.76% (from yesterday's close of 1.77%)
ASIA STOCKS: Most Major Markets Weaker, Led By Tech Exposure
Aug-20 04:08
Some of the key Asian equity benchmarks are down sharply today, particularly those with a tech focus. This follows sharp US losses in this space during cash Tuesday trade. Tuesday saw some profit-taking after stalling around 6500 for the main US benchmark, as the market awaits Powell's Jackson Hole speech. Big Tech was hardest hit, having the largest concentration of positioning. We have also seen follow on US equity futures weakness, led by the tech side so far today. Nasdaq futures were last down a little over 0.50%, while Eminis were off close to 0.30%.
- There are some outperformers within Asia Pac so far today, with New Zealand up over 1.6% after the dovish RBNZ 25bps rate cut. The NZX 50 was last around Jan highs.
- Conversely, Taiwan's Taiex is down around 2.5%, while the Kospi is off close to 2%, as these markets feel the brunt of tech related sell-off. Offshore investors have turned net sellers of these markets in recent sessions as well.
- The NKY225 is down by around 1.8% in Japan, while the Topix is down by 0.75%.
- China's CSI 300 is down a modest 0.1%, while the HSI is down by nearly 0.6% at the lunch time break. The HSI tech sub index is off by 1.26% though.
- In South East Asia, Indonesia is outperforming modestly, up +0.55%, while most other markets are down a touch.
