AUSSIE BONDS: RBC Adjust Market View After AOFM Borrowing Task Outlined
RBC note that they saw “the budget as a slight negative for ACGBs given the degree of additional spending and tax cuts, but the most important aspect is probably the potential RBA reaction function to this extra stimulus. Today’s funding announcement took out the risk of fresh ACGB underperformance that a A$150bn+ task might have brought with it, though; hence, we’re unlikely to see any AU/U.S. underperformance, bond basket widening, or swap spread tightening from here, which could be pinned down as specifically a function of the issuance program.”
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JPY: Yen Catches Bid Amid Demand For Safety, Industrial Output & Retail Sales Disappoint
The yen remains one of the best G10 performers as participants flocked into safe havens in reaction to the escalation in international response to Russia's assault on Ukraine. A number of leaders announced crippling sanctions against Moscow rattling financial markets.
- PM Kishida pointed to the importance of speed in cutting Russian banks off the SWIFT system and freezing Putin's assets, as he pledged to cooperate with other countries on further sanctions.
- Japan's industrial output shrank 1.3% M/M in January, according to preliminary data, with consensus forecast pointing to a 0.7% contraction. Retail sales fell 1.9% M/M in January, a worse outturn than the 1.2% decline forecast by analysts.
- Later this week, focus turns to capex & company profits/sales (Wednesday), comments from BoJ's Nakagawa (Thursday) & jobs market data (Friday).
- USD/JPY has clawed back its initial losses and last changes hands at Y115.58, little changed on the day. A break above Feb 15 high of Y115.87 would encourage bulls to take aim at Feb 10/Jan 4 highs of Y116.34/35. Meanwhile, losses past Feb 24 low of Y114.41 would give bears a green light for targeting Feb 2 low of Y114.16.
US TSYS: TYM2 Operating On Elevated Volume
TYM2 operating on comfortably above average volume for this time of day, with ~180K lots changing hands (only ~11.5K of that is roll related).
CROSS ASSET: Some Regional Divergence Creeping Into Equities, USD Bid Holds
Broader volatility remains evident, with the early themes of USD strength, equity weakness, a bid in core global fixed income and a shunt higher in crude oil prices holding, even if the moves have pared back from extremes. Asia-Pacific equity indices are faring better than their European & U.. counterparts (based on futures movements in Europe & the U.S.), with the Nikkei only ~0.2% lower on the session, while the ASX 200 is actually 0.3% firmer on the day.
