HKD: Spot USD/HKD Up From Bottom End Of Peg Band
May-07 04:29
Spot USD/HKD has moved up from the bottom end of the peg band, the pair last near 7.7540/45. We have continued to see US-HK yield differentials for the 12 month tenor rise, now at +37bps and not too far off 2024 highs. Hibor rates continue to move lower in light of recent HKMA intervention. The 1 month is now off around 100bps versus levels from last week.
- Hong Kong stocks are up around 0.50% in the first part of Wednesday trade, but are well off earlier highs, which came after the PBoC eased policy further and on US-China trade talk optimism.
- Southbound flows were negative in the first part of dealing, which may have weighed on HKD at the margins.
- For spot USD/HKD, we are still sub all key EMAs, the 20-day last close to 7.7585. A break above this level may encourage more short covering for USD/HKD.
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JGBS: Futures Holding Sharply Higher At Lunch But Off Bests
Apr-07 04:06
At the Tokyo lunch break, JGB futures remain sharply higher at 142.19, +53 compared to settlement levels, but well off session bests (142.95).
- “Details in Japan’s February labor cash earnings contained bad news for the Bank of Japan — the pace of increase in base pay for full-time workers on a same-sample basis — the central bank’s preferred gauge — slowed sharply and undershot the consensus forecast.” (per BBG Economics)
- The local calendar will also see Coincident & Leading Indices data later.
- Markets continue to be hit by the ongoing trade-related pullback in risk appetite, although some have begun to stabilise at lower levels due to selling fatigue and profit-taking, including risk-sensitive AUD and oil prices. US equity futures are down sharply but also off their intraday lows.
- Some Asian countries have said today that they will take steps to stabilise markets if needed and Japan has said it will speak with the US.
- Nevertheless, the market are continuing to digest the implications Friday’s unveiling of a 34% duty on all US imports by China.
- Cash JGBs are flat to 11bps richer across benchmarks out to the 30-year (40-year flat), with the belly leading. The benchmark 10-year yield is 9.7bps lower at 1.120% versus the cycle high of 1.596%.
- Swap rates are 6-11bps lower. Swap spreads are mixed.
CHINA: Bond Futures Strong at Open.
Apr-07 03:35
- China’s bond futures are rallying hard at the open with the 10YR leading.
- The 10YR future is up +0.50 to 109.08, breaking through a key technical level of 109.00in this morning’s trading.
- The 2YR future is up +0.09 to 102.64, this morning's trading seeing the 2YR trade through the 100-day EMA of 102.60.
- Cash moves has been significant with the 10YR lower by -8bps to 1.63%, a big drop since the high of 1.89% on March 17.
AUSSIE BONDS: Richer But Well Off Bests As Risk-Off Pared
Apr-07 03:24
ACGBs (YM +10.0 & XM +7.0) are richer but well below today's Asia-Pac session bests.
- Markets continue to be hit by the ongoing trade-related pullback in risk appetite, although some have begun to stabilise at lower levels due to selling fatigue and profit-taking, including risk-sensitive AUD and oil prices.
- US equity futures are down sharply but also off their intraday lows.
- Some Asian countries have said today that they will take steps to stabilise markets if needed and Japan has said it will speak with the US.
- US tsy futures (TYM5) are dealing sharply higher at 113-19, +17 from closing levels, albeit well off the early high of 114-10. Cash US tsys are 3-13bps richer in today’s Asia-Pac session.
- Cash ACGBs are 5-7bps richer with the AU-US 10-year yield differential at +24bps.
- Bill strip pricing is +7 to +11, with whites leading.
- RBA-dated OIS pricing gives a 50bp rate cut in May a 50% probability, with a cumulative 117bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Earlier in the session, a 50bp rate cut in May was given an 80% probability, with a cumulative 133bps of easing priced by year-end.
