CHINA STOCKS: Under Pressure On Earning Results, Broader Growth Concerns

AUDUSD is down slightly to 0.6429 following an intraday high of 0.6445. It is down against other major currencies too. The USD index is unchanged after recovering from its drop earlier.

• AUDNZD is steady at around 1.0643. But Aussie is down 0.1% versus the yen to 95.61 after a high earlier of 95.73. AUDEUR is 0.1% lower at 0.6060 and AUDGBP -0.1% to 0.5228.
• Equity markets are following the US/Europe higher with the ASX up 0.7%, Hang Seng +1.6% and Kospi +2.4%. S&P e-minis are flat. Oil prices are moderately higher with Brent +0.3% to $87.92/bbl. Copper is up 0.1% and iron ore is higher at just under $112.50/t.
• Later the Fed’s Bowman, Waller, Bostic and Collins speak plus the September Fed minutes are released. On the data front, US September PPI is released. The ECB’s Lagarde and Panetta will attend the IMF/World Bank annual meetings.

At the Tokyo lunch break, JGB futures are sitting near Tokyo session highs, +8 compared to settlement levels.

• Today the local calendar has been light, with Machine Tool Orders due later today.
• Hence, local participants have likely been on headlines and US Tsys watch. Cash US Tsys are 1bp cheaper to 5bps richer in Asia-Pac dealings, with the curve flatter.
• Cash JGBs are mixed, with yield movements bounded by +0.5bp (2-year) to -1.8bps (20-year). The benchmark 10-year yield is 0.8bp lower at 0.775%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814% set late last week.
• The 5-year JGB yield is 0.9bp lower at 0.308%, ahead of today’s supply. It is worth noting that the 5-year has recoiled from the highest outright yield level this year over the past few days. Nevertheless, an outright yield that is still higher than that seen at the September auction should support the reception of today's auction. The September 5-year auction saw solid demand metrics, with the auction's low price beating dealer expectations, the cover ratio rising and the tail shortening.
• The swaps curve has bull-flattened, with rates 0.4bp to 4.2bps lower. Swap spreads are tighter.

The Japanese Ministry of Finance (MOF) will today sell Y2.5tn of 5-Year JGBs, re-opening JB#161. The MOF last sold 5-year debt on 12 September 2023, with the auction drawing cover of 4.415x at an average yield of 0.291%, an average price of 100.04, a high yield of 0.295%, a low price of 100.02, with 81.7630% of bids allotted at the high yield.

• The September 5-year auction saw stronger demand, with the auction's low price beating dealer expectations. This stronger demand was also reflected in the cover ratio of 4.415x, a notable increase from the 3.346x recorded at the previous month's auction. Adding further to the solid metrics, the tail shortened.
• However, today's auction comes on the heels of mixed to poor digestion at October’s 10- and 30-year JGB supply. The low-price beat predictions and the tail shortened at the latest 10-year auction, but the cover ratio down ticked. In contrast, last week’s 30-year supply was poor across all metrics. Notably, the tail was the longest since June 2019.
• It is worth noting that the 5-year JGB yield has recoiled from the highest outright level this year over the past few days. Nevertheless, an outright yield that is still higher than that seen at the September auction should support the reception of today's auction.
• That said, recent JGB auction outcomes suggest that local investors may be inclined towards seeking higher yields or prefer more time to assess the BoJ's policy outlook before significantly increasing their allocations to the JGB market.
• Results are due at 0435 BST/1235 JST.