BOJ: Rinban Purchase Offer

• CHINA SETS YUAN CENTRAL PARITY AT 7.0764 MON VS 7.0749

In Tokyo morning trade, JGB futures are unchanged compared to settlement levels.

• (Bloomberg) “Japan's economy shrank in the three months through September, with gross domestic product falling at an annualised pace of 2.3% in the third quarter. The contraction was deeper than the initial reading and was the first in six quarters, with business spending and housing investment coming in weaker than preliminary figures.”
• (MT Newswires) “Japan's real wages in October slipped 0.7% from the same month a year earlier, marking the 10th consecutive month of wage decline, according to the Ministry of Health, Labour and Welfare on Monday. The reading was an improvement from the 1.3% drop in September.” Via BBG
• Cash US tsys are slightly richer in today's Asia-Pac session after Friday’s modest sell-off.
• Cash JGBs are mixed across benchmarks, with yields 2bps higher (20-year) to 1.5bps lower (40-year). The benchmark 10-year yield is 0.8bps higher at 2.945% a fresh cycle high (see chart).
• Swap rates are flat to 1.5bps higher.

Source: Bloomberg Finance LP

The BBDXY range Friday night was 1211.27 - 1213.79, Asia is currently trading around 1211, -0.05%. US yields extended their bounce and risk consolidated its recent gains. The USD again saw decent demand back toward the 1211 area and it looks like the range 1210-1230 is here to stay for the moment. On the day look for resistance again back towards the 1215-1217 area where sellers should remerge initially, support remains toward 1210/11 which needs to be worked through and then the more important 1205 area. 

• The FOMC will be important this week with the market recently pricing in rate cuts, how many dissenters are needed to put a dent in this view ?
• WEDNESDAY - FOMC Decision: This week’s US calendar is dominated by the FOMC decision on Wednesday, with a third consecutive 25bp cut almost fully priced. Expect it to be a contentious meeting however, with many arguing for a pause not least whilst they’re still relatively in the dark on key official data releases following the government shutdown.
• The BBDXY Average True Range for the last 10 Trading days: 327 Points

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P