TWD: Rallying, Tracking For Best Session Since Early May
Spot USD/TWD has fallen noticeably in the first part of Thursday trade, the pair last in the 29.70/75 region. We are up around 0.65% so far in TWD terms. If sustained this would be the best session for the local currency since early May. Downside focus in the pair is likely at earlier May lows close to 29.60, which came during the rapid fall in the pair from late April levels close to 32.50.
- Spot USD/TWD remains oversold based off RSI (14), albeit not to the same degree as earlier in May. NDF points have normalized to a degree, with 1 month around -.20, we got to -.65 in early May, which may encouraging some fresh hedging flows. 6mth and 12mth NDF points are still depressed relative to history but also up from recent lows.
- Otherwise, it's difficult to find a direct catalyst for today's move, outside of broader USD weakness (JPY gains will likely be helping TWD at the margin).
- We have seen a return of equity inflows (+$3bn in the past 5 trading days), aided by TSMC's positive May sales results. The Taiex is weaker in the first of trade today.
- Economic fundamentals from an export growth standpoint also stick out compared to rest of the region. The chart below plots y/y export growth for externally orientated economies in the region, with Taiwan the orange line. Some slowing is expected but headlines crossed earlier this week with expectations of 15-25%y/y export growth for June.
Fig 1: Export Growth In Asia - Y/Y, Taiwan Remains A Standout
Source: Bloomberg Finance LP / MNI
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JGBS AUCTION: Poll: 30-Year JGB Auction
*JAPAN 30Y GOVT BOND AUCTION MAY HAVE 91.10 LOWEST PRICE:POLL – BLOOMBERG
JGBS AUCTION: 30Y Supply Faces A Much Higher Yield
The Japanese Ministry of Finance (MoF) will today sell Y800bn of 30-Year JGBs. The MoF last sold 30-year debt on 8 April 2025.
- This month’s 30-year JGB auction features an outright yield approximately 50–55 basis points higher than last month’s issuance. Notably, the current yield is hovering just below its cycle high of 3.0%.
- The 10s30s yield curve is now 5–10 basis points steeper than at the time of the previous auction, though still around 10 basis points below its recent peak.
- On a relative value basis, the 30-year bond remains largely unchanged versus last month when viewed through the 20-/30-/40-year butterfly spread.
- Today's supply comes amid weakening sentiment toward longer-dated global bonds, weighed down by positive trade deal developments, consistently strong U.S. economic data, and a further pushback in expectations for Fed rate cuts.
- Against this backdrop, today’s 30-year auction will serve as a key gauge of investor appetite in the face of heightened uncertainty.
- Results are due at 0435 BST / 1235 JT.
AUSTRALIA DATA: NAB Bus Conditions Continue To Trend Lower, Labor Costs Steady
The NAB Australian business survey saw conditions ease to +2 from a revised +3 reach in March. On the confidence front, the reading edged up to -1 from -3 prior. These headline measures aren't suggesting a sharp turnaround in domestic economic growth momentum in the near term.
- The first chart below plots NAB business conditions against GDP growth in y/y terms. Whilst the conditions measure is above the level of GDP growth, conditions have been trending lower since a cycle peak back in late 2022.
- Business confidence has largely tracked sideways in recent years, and struggled above to sustain positive readings.
Fig 1: NAB Australian Business Conditions Versus GDP Growth Y/Y
Source: NAB/MNI - Market News/Bloomberg
- In terms of the detail, trading conditions edged down to 5.2 from 5.7, while profitability fell to -4.2 from around flat prior. This is the weakest profit reading since 2020.
- The employment sub index edged down to 3.5, but has been fairly steady. The labour cost measure was unchanged at 1.6 and remains close to unchanged since late last year. The second chart below is of this metric versus the wage index published by the ABS (in y/y terms). This measure for Q1, prints tomorrow, with the y/y outcome projected unchanged at 3.2%y/y (which is consistent with recent NAB outcomes).
- The prices measure rose to 0.8 from 0.6 in March, but has been sub 1.0 since June last year.
Fig 2: NAB Australian Labour Costs Versus Wages Growth Y/Y
Source: NAB/MNI - Market News/Bloomberg
