ASIA: South Korea & Taiwan PMIs Decline Further

The ESU5 overnight range was 6227.25 - 6261.50, Asia is currently trading around 6253. A subdued session for the S&P and NASDAQ, price action was very interesting though as the market seemed to take profit in Tech and these profits are then being rotated to indices that have been lagging, Russell 2000 +1.03%, Dow Transport +2.85%, Regional Banks +3.46%. These laggers are just starting to gain some momentum and this rotation could play out more in the short-term which would certainly help with the market breadth. This morning has seen US futures open slightly higher in our session ESU5 +0.08%, NQU5 +0.10%. 

• (Bloomberg) -- “Bullish signals are materializing across equity markets and trend following strategy funds, or CTAs, are expected to buy large sums, according to UBS strategists. The team led by Nicolas Le Roux expects CTAs to double their equity exposure over the next two weeks, adding $40 billion to $50 billion to their current positions. They say technicals have turned very bullish equities, citing resistance levels out of the picture, most indexes printing new all-time highs, retail investors starting to buy again, and institutionals still underweight. “CTAs have no other option than to buy, and in size,” the strategists say. “We see them buying in almost all scenarios, unless the S&P 500 reverts to 5,900.”
• Lance Roberts on X: ”With consolidated equity positioning still underweight it looks like this rally may have some more legs to it.” 
• The market has been caught underweight and with momentum type funds(CTA’s) adding through all-time highs these reluctant PM’s are being forced to return to the market. 
• Short-term this does look a little overdone but dips should find demand, first support is back towards the 6100 area.

Fig 1: Russell 200 Weekly Chart

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

The Australian Office of Financial Management (AOFM) will today sell A$1200mn of the 2.75% 21 June 2035 bond, issue #TB145. The line was last sold on 2 May 2025 for A$900mn. Bidding is likely to be shaped by several key factors: 

• The current yield for this bond is approximately 10bps below the level of the previous auction and 60bps below the high recorded in early November 2024.
• The 3/10 yield curve is around the same level as the previous auction but sits 20bps below its recent high.
• Notably, investor sentiment toward longer-dated global bonds has improved over June.
• The inclusion of the Jun-35 line in the XM basket may also lend support to demand.
• Results are due at 0200 BST / 1100 AEST.

The Australian Office of Financial Management (AOFM) will today sell A$1200mn of the 2.75% 21 June 2035 bond, issue #TB145. The line was last sold on 2 May 2025 for A$900mn. 

• The sale drew an average yield of 4.2413%, at a high yield of 4.2425% and was covered 3.4444x. There were 34 bidders, 13 of which were successful and 6 were allocated in full. The amount allotted at the highest yield as a percentage of the bid at that yield was 94.2%.
• This week's ACGB supply is above the top end of the recent average weekly issuance of $1500-2000mn, with A$1000mn of the 2.25% 21 May 2028 bond on Friday.
• During the first half of 2025-26, the AOFM plans to: issue a new October 2036 Treasury Bond (by syndication and subject to market conditions); conduct 2 Treasury Bond tenders most weeks; hold 1-2 Treasury Indexed Bond tenders each month. 
• Issuance of Treasury Bonds (including Green Treasury Bonds) in 2025-26 is expected to be around $150 billion. Issuance of Treasury Indexed Bonds in 2025-26 is expected to be between $2 billion and $3 billion. 
• Results are due at 0200 BST / 1100 AEST.