JGBS AUCTION: Poor 30Y Auction
Jun-05 03:54
The 30-year JGB auction delivered poor results, suggesting weak investor demand. The low price fell short of dealer expectations of 92.00, per the Bloomberg survey. Moreover, the cover ratio fell to 2.9215x from 3.0739x, and the auction tail lengthened significantly to 0.49 from 0.30, both indicating a marked deterioration in bidding strength.
- Today’s result stands in sharp contrast to the 10-year auction earlier this week, which demonstrated stronger demand metrics.
- As highlighted in our preview, today's issuance arrived with an outright yield at approximately the same level as last month’s issuance, 25-30bs below its cycle high of 3.20%.
- However, on a relative value basis, the 30-year bond had cheapened markedly compared to last month, based on the 20-/30-/40-year butterfly spread. It was now sitting at its most discounted level in over 20 years.
- Given this uncertain environment, today’s weak result is likely to be seen as a failed test of investor appetite.
- (Bloomberg) -- The Bank of Japan weighs slowing the pace of tapering in its bond purchases as of the next fiscal year, Reuters reports, citing people familiar with the matter. There is no consensus yet within the BoJ, with a final decision expected at the next policy meeting on June 16-17.
- The 30-year JGB is slightly cheaper than pre-auction levels in early afternoon trading.
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US TSYS: Asia Wrap - Futures Edge Lower
May-06 03:54
TYM5 has traded lower within a range of 110-30 to 111-03 during the Asia-Pacific session. It last changed hands at 110-30, down 0-03 from the previous close.
- Futures are trading lower in Asia as China returns from holidays, China’s April's PMI services unexpectedly dipped in April in signs that the US tariff war is hurting.
- The CAIXIN PMI services had printed above 51 for six successive months and market expectations were for a continuation of this theme and a print of +51.8.
- April's result of +50.7 is the lowest since September and could be an early warning sign that the economy is slowing quicker than first thought.
- Risk in Asia has traded on the backfoot for most of our session following on from the poor close in the US.
- No cash market today with a holiday in Japan.
- The 10-year Yield range seems to be 4.10% - 4.45%, price has moved above the 4.30% pivot and with more supply to come this week a push back to 4.45% is possible before the buyers come in.
- Data/Events : US Trade balance
BONDS: NZGBS: Closed With A Bear-Steepener, Q1 Employment Report Tomorrow
May-06 03:50
NZGBs closed showing a bear-steepener, with benchmark yields finishing 1-4bps higher but slightly off the session’s worst levels. The NZ-AU 10-year yield differential was unchanged at +21bps. There were no cash dealings in US tsys in today's Asia-Pac session with Japan out. TYM5 is slightly cheaper.
- NZ’s commodity export prices were unchanged from a month earlier in April.
- Swap rates closed flat to 4bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed little changed across meetings. 26bps of easing is priced for May, with a cumulative 76bps by November 2025.
- Q1 labour market data are released on Wednesday, and forecasts are in a narrow range across the major components. Bloomberg consensus expects the unemployment rate to rise 0.2pp to 5.3%, above the RBNZ’s 5.2% and would be the highest since Q4 2016, and employment to rise 0.1% q/q, signalling a stabilisation in the labour market.
- Private wages are expected to rise 0.5% q/q, slightly slower than Q4. Outcomes close to these are unlikely to alter the RBNZ’s probable 25bp rate cut on May 28.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.25% May-36 bond and NZ$50mn of the 2.75% May-51 bond.
CHINA: Bond Futures Do Little as OMO Withdraws Liquidity
May-06 03:42
- Following the long labour day break in China the first trading day back has seen marginally stronger bond markets, despite the Central Bank withdrawing liquidity in the open market operations.
- China’s 10YR bond future is up just +0.05 to 109.10; consolidating its’ position above all major moving averages. The nearest being the 20-day EMA at 108.79
- China’s 2YR bond future has barely moved post the holiday break and remains at 102.35, below the 20-day EMA of 102.42.
- CGB’s are little changed with the CGB 10YR at 1.62% (-0.5bp today).
- Later this week China is expected to issue CNY71bn of 2055 bonds and CNY170bn of 2026 bonds
