US TSYS: Slightly Richer, Holding Yesterday's Tsy Buyback Induced Gains

NZGBs closed 2-3bps cheaper on the day but 3-4bps richer versus pre-CPI levels. 

• Swap rates closed 2-3bps lower.
• Headline inflation rose 1.5% q/q & 4.1% y/y in Q2 up from Q1’s 0.9% & 3.1% and above the top of the RBNZ’s 1-3% target band for the fourth consecutive quarter. It also exceeded the RBNZ’s 3.9% July projection.
• The increase was driven by tradeables which jumped 2.7% q/q & 4.9% y/y, highest quarterly rise since Q3 2021, due to the jump in fuel prices in the quarter because of the Iran War.
• The RBNZ’s Q2 sectoral factor model inflation index printed 2.7% y/y matching pace in Q1. Sectoral factor non-tradable core inflation 3.6% y/y, also matching Q1 pace. Sectoral factor tradable core inflation 1.6% y/y.
• RBNZ-dated OIS pricing closed little changed, remaining currently 10-32bps firmer across meetings than this month’s pre-hike levels. The market has priced 23bps of tightening for the September meeting, with 78bps priced by February 2027.  The market is pricing an expected OCR peak at 3.54%.
• The local calendar will be empty for the remainder of the week.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.50% Apr-33 bond, NZ$150mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.

Bloomberg Finance LP

TYU6 is dealing at 108-30, +0-02+ from closing levels in today's Asia-Pac session.

• Cash bonds are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's moderate sell-off. Yesterday, risk sentiment cooled following Trump social media post: Every time Iran kills an American Soldier they will pay for that killing many times over!
• (CNBC.com) “JPMorgan Chase CEO Jamie Dimon said investors are underestimating geopolitical and fiscal risks that could eventually rattle markets. Dimon said he wouldn't be a buyer of either equities or long-dated U.S. Treasurys at current prices.” Via BBG
• (Bloomberg) “Interest-rate strategists at Morgan Stanley see scope for gains in the US Treasury market on the view that companies will pull back on corporate-debt sales in the coming summer months.”
• MNI Techs (TYU6): The short-term trend condition in Treasuries is unchanged, it remains bearish and recent gains appear corrective. Resistance to watch is 109-21+, the 50-day EMA. A clear break of this EMA would expose 110-10+, the Jun 7 high and a reversal trigger. For bears, key support lies at 108-08+, the May 19 low and a bear trigger. A breach of this level would confirm a resumption of the downtrend.

Bloomberg Finance LP

The sharp rebound in South Korea’s KOSPI (+4.7%) and Taiwan’s TAIEX (+3.5%) today as bargain-hunters stepped in for semiconductor stocks and easing energy-inflation worries following a volatile global market sell-off yesterday.  Key names like SK Hynix (+1.%), Samsung (4.2%) and TSMC (+3%) were behind the gains.  The gains come ahead of  Alphabet's Q2 earnings report on July 22. As the first major U.S.to report, its AI infrastructure spending guidance will dictate whether heavyweights Samsung Electronics and SK Hynix suffer more or stage a technical rebound.  SK Hynix currently is trading at a P/E of 17.5, Samsung 20.5 and TSMC 27.7.  Micron Technology (\(MU\)) is the closest US equivalent to these three in terms of business model and is trading at 19.4 P/E.  

The rebound in tech stocks has given the NIKKEI a boost with gains of 2% as arguably Japan's most volatile AI tech stock KIOXIA jumps +15% today, regaining the losses from Friday.  Reopening after a long holiday weekend, investors aggressively bought heavily discounted shares. This follows a  -6.4% decline last week that pushed the Nikkei briefly into correction territory.

China stocks continue to perform with the CSI 300 up +1.7% whilst the Hang Seng is flat.  The rise in China's blue-chip CSI 300 Index today is being driven by a heavy coordinated intervention by state-backed institutions (known as the "National Team") alongside aggressive regulatory pledges to halt a brutal two-week market correction.

Ahead of the Central Bank decision tomorrow, the Jakarta Comp is up 1% today to cap off 10 straight days of gains.  The consensus has shifted in recent days to a hike by the BI in what has the potential to be the last in this cycle.  Still looming in the background is the MSCI decision but that is not until November.