JGBS: Subdued Session Ahead Of Natl CPI & BoJ Rate Decision Tomorrow
Jan-23 04:37
JGB futures are marginally weaker, -6 compared to settlement levels, after a choppy session around flat.
- Outside of the previously outlined trade balance and international investments data, there hasn't been much by way of domestic drivers to flag.
- The BoJ will announce its latest monetary policy decision tomorrow, with expectations that it will move further along its policy normalization path. Both market consensus and our analysis suggest a 25bps rate hike as the most likely outcome.
- National CPI data will be released just hours before the BoJ's rate decision tomorrow. Market consensus anticipates core inflation (excluding fresh food) to rise to 3.0% y/y in December, up from 2.7% in November. A stronger-than-expected increase in national CPI could intensify pressure on the BoJ to hike tomorrow.
- Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest losses.
- Cash JGBs have twist-flattened across benchmarks, pivoting at the 10-year, with yields 1bp higher to 2bps lower. The benchmark 10-year yield is flat at 1.201% versus the cycle high of 1.262%.
- Swap rates are flat to 1bp lower, with the curve flatter.
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FOREX: USD Modestly Higher, Yen Pares Losses Post FinMin Warning
Dec-24 01:35
Early G10 FX trends are skewed towards the USD, albeit with modest moves overall. AUD and NZD are seeing some slight underperformance (which followed some outperformance on Monday). Rhetoric around FX moves has crossed from the Japan FinMin as well.
- The reaction so far from USD/JPY has been limited. We were last 157.15/20, close to unchanged for the session. Earlier highs were at 157.39.
- Japan FinMin Kato reiterated recent concerns on FX - "JAPAN FINMIN KATO: CONCERNED ABOUT RECENT FX MOVES, RTRS" "JAPAN FINMIN KATO: RECENTLY SEEING ONE-SIDED, SHARP FX MOVES" and that the authorities will take action against excessive moves.
- USD/JPY is still sub post BoJ highs (157.93), with these comments highlighting intervention risks as we approach the holiday period. Earlier the BoJ minutes from the Oct policy meeting came and went with little market reaction.
- AUD/USD sits down around 0.20%, last near 0.6235/40. Downside focus will rest on the 0.6199 low seen recently. The RBA minutes from the Dec meeting were out earlier. Upside risks to inflation have diminished but it was still too soon to be confident that inflation is sustainably at target.
- NZD/USD is also lower, last near 0.5635/40. Also, still up from recent cycle lows.
- Trends are biased in favour of the USD elsewhere, but aggregate moves are modest. In the cross asset space, US equity futures are down a touch, along with US yields, but again overall moves are modest.
- There is little in the way of further risk events for the remainder of today's Asia Pac session.
CHINA: Central Bank Drains Liquidity via OMO.
Dec-24 01:27
- PBOC issues CNY64.1bn of 7-day reverse repo.
- Today’s maturities CNY355.4bn
- Net Liquidity withdrawal CNY291.3bn.
- The PBOC controls liquidity in the interbank market through the daily issuance of reverse repo.
MNI: CHINA PBOC CONDUCTS CNY64.1 BLN VIA 7-DAY REVERSE REPOS TUES
Dec-24 01:24
- CHINA PBOC CONDUCTS CNY64.1 BLN VIA 7-DAY REVERSE REPOS TUES
