JGBS: Twist-Flattening Ahead Of 5Y Supply
At the Tokyo lunch break, JGB futures are weaker, -9compared to settlement levels.
- Japan's Feb PPI was weaker than forecast, falling 0.1%m/m (versus 0.2% forecast and 0.2% prior). In y/y terms we eased to 2.0%, against a 2.2% forecast and prior 2.3% outcome.
- Cash US tsys are 1-2bps richer in today's Asia-Pac session after yesterday’s bear-steepener.
- Cash JGBs have twist-flattened across benchmarks, with yields 2bps higher to 1bp lower. The benchmark 5-year yield is 1.8bps higher at 1.642% ahead of today’s supply.
- The yield on today’s 5-year offering is similar to last month’s level and sits 10bps below its cycle high.
- The 2s/5s curve is slightly flatter than last month’s outing, 10-15bps below its cycle high (steepest since late 2009).
- From late last year, the steepening of the yield curve had been most pronounced in the 2/5 segment, with the 5-year sector seen as relatively unattractive. Rising market expectations for BOJ rate hikes had been placing upward pressure on the 5-year yield.
- Those expectations had moderated from late January until last week. However, with BOJ hike expectations higher again on the back of the recent oil price surge, the 2/5 curve has moved away its flattest level since November.
- Swap rates are ~2bps higher.
Source: Bloomberg Finance LP
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CRYPTO: Bitcoin - Bounces Back Above $70k After Friday Capitulation
Bitcoin had a range over the weekend of $67,324.98 - $71,465.34, Asia is currently trading around $70500, -0.20%. Bitcoin had a solid bounce off of the $60k area as risk turned higher after what looked like another leg of stops being executed. We have seen some huge deleveraging of risk, most notably in Metals and Crypto, could that be it for now ? Technically it remains in a bear trend and we would need to see demand like we saw on Friday return and form a base down here from which to move higher again. The first sell-zone is right here in the $72k-$76k area and then the $80k-$85K area where sellers should return initially.
- Holger Zschaepitz on X: “I like this chart from the latest note by credit legend Matt King, who shares sharp and often provocative ideas through Satori Insights. It shows a correlation between the change in the Fed's balance sheet and Bitcoin. His rule of thumb is that expansions in central bank reserves tend to inflate the frothiest parts of the market, crowding out value investing and encouraging momentum, FOMO, and trend-chasing. It’s not hard to imagine a scenario in which these segments come under pressure one by one – starting w/Bitcoin: "We’ve long argued that momentum-driven markets are prone to sawtooth-shaped pullbacks. A shift toward smaller central bank balance sheets would likely accelerate those reversals." See Graph below.
- Bitcoin’s Average True Range(ATR) for the last 10 Trading days: $5,058
Fig 1: Bitcoin spot Daily Chart
Source: MNI - Market News/Matt King/@Schuldensuehner
CNH: Downtrend In USD/CNH Still Intact As LNY Approaches, CNH/JPY Falters
Spot USD/CNH tracks near 6.9320 in latest dealings, very close to recent cycle lows of 6.9290. The pair fell through Friday trade, largely tracking broader USD index losses, as risk appetite stabilized (precious metals higher, equities bounce). This leaves the technical downtrend intact for the pair, with the 6.9000 region the downside focus point, although we have had a very steady start to this week. Some USD softness, centered around yen gains, has largely been ignored by CNH so far today. For USD/CNH, the 20-day EMA resistance point, which has capped recent upticks in the pair, rests close to 6.9515/20. Further north is the 50-day around 6.9900.
- Broader G10 focus rests on USD/JPY gyrations post the strong weekend election outcome for PM Takaichi. CNH/JPY is off earlier highs, last around 22.595 (earlier we got close to 22.76). Shifts in this cross are more likely to reflect JPY moves than vice versa.
- The USD/CNY fix fell, but the error term was wider earlier, with little impact on CNH. Note the lunar new year break kicks off at the start of next week, so corporate flows may start to slow from a repatriation stand point.
- Spot USD/CNY is also little changed in the first part of trade, last around 6.9340/45. The CNY CFETS basket tracker is slightly off recent highs, last around 98.19.
- This week we have Jan new loans/aggregate credit data. Also note on Wednesday Jan CPI is due.
MNI EXCLUSIVE: Former RBA Economist Shares His Policy Rate Outlook
A former RBA economist shares his policy rate outlook. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
