FOREX: USD Trades with Constructive Tone, JPY Volatility Stands Out
May-22 17:49
- The US Dollar has traded on a firmer footing Thursday, with the USD index currently up around 0.55% as we approach the APAC crossover. This theme has been underpinned by a more stable session for treasuries, where yields have had a strong reversal lower from the week’s highest levels. Nominal 30Y yields are down 9-10bp from highs, having rejected the 2023 peak around 5.15% for now.
- The most notable moves in G10 FX were once again dominated by the volatile Japanese yen, which remains sensitive to both domestic headlines and the prevailing sentiment surrounding US assets. USDJPY received an early session boost to 144.40 on headlines related to the meeting between US Tsy Secretary Bessent and Japan FinMin Kato where they discussed a shared belief that exchange rates should be market determined.
- However, this sentiment was quickly faded, and subsequent headlines from BOJ’s Noguchi on not intervening in JGB bond markets and the initial twist steepening of the treasury curve prompted an impressive USDJPY selloff to session lows of 142.81. In another impressive swing, the subsequent flattening of the US curve and late comments on no secret talks on fx policy from Miran extended a relief recovery back towards session highs.
- Separately, EUR weakness has stood out following weaker-than-expected German and Eurozone flash services PMIs. Price action has been uninspiring, however, EURUSD is down 0.5% on Thursday, with spot gravitating towards the 1.1265 mark, but still up over a big figure on the week. Single currency weakness also stands out against sterling, as EURGBP has also fallen around half a percent to trade below 0.8400 and close in on last week’s pullback lows located at 0.8394. GBPUSD has broadly respected a 1.3400-50 range, outperforming the likes of AUD and NZD which have adjusted lower in tandem with the broader greenback strength.
- New Zealand retail sales and Japan national CPI data are due in Friday’s APAC session. This will be followed by UK and Canadian retail sales, with US new home sales highlighting the US docket.
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PIPELINE: Corporate Bond Update: $5.7B to Price Tuesday
Apr-22 17:46
- Date $MM Issuer (Priced *, Launch #)
- 04/22 $2B #State Street $700M 3NC2 +73, $300M 3NC2 SOFR+95, $1B 5Y +85
- 04/22 $1.85B #Kinder Morgan $1.1B 5Y +120, $750M 10Y +150
- 04/22 $1.1B #NY Life Global $700M 3Y +60, $400M 3Y SOFR+88
- 04/22 $750M #Brookfield Asset Management 10Y +140
- 04/22 $Benchmark OCP 5Y, +10Y investor calls
- 04/22 $Benchmark Rentokil investor calls
US: FED Reverse Repo Operation
Apr-22 17:35
RRP usage climbs to $137.951B this afternoon from $114.114B yesterday. Usage had fallen to $54.772B last Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B. The number of counterparties at 42.
STIR: Fed Rate Path Climb Tempered By Trade Headlines
Apr-22 17:34
- Fed Funds implied rates have pared some of their sharp shift higher when Bloomberg first reported that US Tsy Sec Bessent said at a closed-door investor summit that he sees de-escalation with China whilst the current situation is unsustainable.
- The trimming of the day’s increase has come with subsequent headlines from Reuters re it likely to be a “slog” and Politico reporting the US is close on Japan and India trade agreements but with details suggesting less progress.
- Going against the trimming somewhat, a modest tail in the 2Y Tsy auction at 1300ET.
- Cumulative cuts from 4.33% effective: 3bp May, 18bp Jun, 39bp Jul, 58bp Sep and 89bp Dec.
- SOFR implied yields currently see largest increases in the M6 (+8bp), whilst the terminal remains in the U6 as it climbs to 3.15% (+7.5bp) for almost one additional 25bp cut priced vs pre-Liberation Day levels.
- Today’s Fedspeak from Vice Chair Jefferson (permanent voter) and Harker (retiring June) hasn’t moved markets, seemingly taking a deliberately non-confrontational approach amidst Trump’s latest demands for lower rates. Still to come today:
- 1340ET - Kashkari ('26 voter) at Chamber of Commerce Global Summit (Q&A only)
- 1430ET - Barkin (non-voter) fireside chat at innovation summit (Q&A only)
- 1800ET - Gov. Kugler (permanent voter) on monetary policy transmission (text + Q&A). She said Apr 7 that inflation was now the more pressing issue with regards to tariffs and that the Fed needs to make sure it doesn't rise. She warned the tariff impact should be consequential.
