CNH: USD/CNY Fixing Another YTD Low, USD/CNH Testing Under 7.1500

The Australian Office of Financial Management (AOFM) sells A$1000mn of the 2.25% 21 May 2028, issue #TB149:

• Average Yield (%): 3.4184 (prev. 3.3071)
• High Yield (%): 3.4225 (prev. 3.3100)
• Bid/Cover: 3.3300x (prev. 3.9550x)
• Allotted at Highest Accepted Yld as % of Bid at that Yld (%): 20 (prev. 45.3)
• Bidders 38 (prev. 35), successful 21 (prev. 14), allocated in full 16 (prev. 8)

The ESU5 overnight range was 6408.75 - 6457.75, Asia is currently trading around 6427. The September contract finally stalled above the 6450 as some risk is taken off heading into a big week. This morning has seen US futures open slightly higher, ESU5 +0.10%, NQU5 +0.20%. The animal spirits remain strong even though price is looking stretched. While above the 6230/50 area dips will probably continue to be supported, a break below this support is needed to signal a possible correction. There is lots of event risk coming up this week and we are heading into month-end so caution is warranted.

• Olivier Blanchard on X: “On the Japan so called deal. Trump can win many fights, but one thing he cannot do is win fights against accounting identities. Trade deals, whatever they do, cannot, as claimed, simultaneously reduce the US current account deficit, and increase net capital flows to the US. The reason: current account  deficit = net capital flows.”
• Julian Brigden on X: “Per Olivier Blanchard's post. The Current Account Deficit = Capital Account Surplus. Therefore, if Miran is right, foreign inflows into US assets are about to "decline even faster and further" and with more FDI, that means less in bonds and stocks.”
• Sean D. Emory on X: “Equity put/call ratio( $CPCE ) just spiked to 0.72… highest since the early June flush. +26% in a single day, one of the largest jumps of the year, fear not complacency. Interesting timing as we head into a packed earnings week with Meta, Amazon, Microsoft, Coinbase, and Fiverr all reporting.” See Graph Below.
• Lance Roberts(RIA) - “Between this week’s labor and inflation data, corporate earnings, and new Fed guidance, the market has a lot of new information to digest. We should expect a healthy dose of volatility around many of the events we highlight.”
• Short-term this continues to look stretched but it's very hard to fight a market with this type of momentum. First support is back towards the 6000/6100 area.

Fig 1: Equity Put/Call Ratio

Source: MNI/@_SeanDavid

The Australian Office of Financial Management (AOFM) will today sell A$1000mn of the 2.25% 21 May 2028, issue #TB149. The line was last sold on 4 July 2025 for A$1000mn. Several factors could influence bidding at today’s auction. 

• Firstly, the May-28 bond's outright yield is 10-15bps higher than the previous auction but remains around 80bps lower than the cycle peak in early November last year.
• Secondly,  market expectations for RBA easing in 2025 remain aggressive with a 25bp rate cut in August given a 90% probability, with a cumulative 59bps of easing priced by year-end.
• It's important to note that the May-28 bond is included in the YM basket, but investor sentiment toward global bonds has deteriorated over July.
• Overall, another round of well-received supply is expected.
• Results are due at 0200 BST / 1100 AEST.