AUSSIE BONDS: Richer, Off Best Levels, Light Local Calendar
ACGBs (YM +1.0 & XM +2.0) are richer but off Sydney session highs on a light data day. With the local market lacking news flow, domestic participants appear to have used US tsy dealings in today’s Asia-Pac session for directional guidance after being closed on Monday and Tuesday for the Christmas holiday period.
- Cash US tsys are dealing 1-2bps richer across the major benchmarks in a relatively muted start to Wednesday's dealing.
- Cash ACGBs are 2-3bps richer, with the AU-US 10-year yield differential at +10bps.
- Swap rates are 3-4bps lower.
- The bills strip is firmer, with pricing flat to +4. Early reds are leading.
- RBA-dated OIS pricing is flat to 3bps softer across meetings, with Nov’24 leading.
- Tomorrow, the local calendar is empty again.
- Details on issuance plans (including any new planned bond lines) for the second half of 2023-24 will be provided on 5 January 2024 by the AOFM.
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BONDS: Tick Lower Through Monday's Session
NZGBs have ticked lower through Monday's session however ranges remained narrow in the space, and sit 1-3 bps cheaper across the major benchmarks. Light bear steepening has been observed.
- Pressure was seen on the space as regional equities ticked lower alongside US equity futures and the USD firmed as the PBoC vowed to boost bond issuance by private firms, and also support M&A's, IPOs of private sector firms.
- 10 Year NZ US swaps spreads remain stable and sit at +52bps.
- With Wednesday's RBNZ meeting in view OIS price no change in the OCR with ~40bps of cuts by October 2024.
- PM Luxon noted that he is concerned at the risk of recent fiscal deterioration.
- Looking ahead, the data docket is empty tomorrow. The aforementioned RBNZ meeting is the next event of note in NZ.
HKD: USD/HKD Spot Sub 7.7900 On Further Hibor Rises
Spot USD/HKD continues to trend lower. The pair was last near 7.7875, against earlier lows of 7.7861. We opened at 7.7928. Even as CNH has stabilized somewhat, HKD continues to enjoy yield support as Hibor rates climb further.
- The 1 month his a fresh 16yr year high today at 5.534%, (+15.5bps). The 3 month fixed at 5.71%, +6.6bps. The US-HK 3 month yield continues to track lower, last at -32bps, fresh lows back to Jan of this year.
- Seasonality in terms of cash demand and a low start starting point for the aggregate balance, are being cited as factors driving firmer yields.
- Early Dec 2022 lows were at 7.7617, which could be targeted if we breach 7.7800.
- The data calendar has Oct trade figures out later today. The market expects exports at -2.9% y/y (prior -5.3%). Arguably US data outcomes, particularly in relation to prices, will have a bigger influence on USD/HKD as we progress through this week.
JGBS: Futures Down, But Up From Session Lows, Ueda Due In Parliament Later
At the lunch break, JGB futures sit just above session lows (145.53), last 145.60, -.06.
- This broadly matches the US Tsy future trajectory, which are also up from session lows (last 108-09+).
- Some marginal support may be coming through from lower US equity futures and a softer oil price backdrop.
- In the cash JGB space, yields sit marginally higher. The 10yr is a touch above 0.78%. Firmer yield gains are evident across the 20-40yr tenors. The 20yr back above 1.51%. The 10 swap rate is back above 0.99%. But like the JGB space, the back end of the curve is seeing slightly strong yield gains.
- Still to come is BoJ Governor Ueda before parliament.
