CNH: USD/CNY Fixing at 7.1620

The AOFM sells A$400mn of the 4.25% 21 June 2034 Green Bond:

• Average Yield (%): 4.2162 (prev. 4.1725)
• High Yield (%): 4.2175 (prev. 4.1750)
• Bid/Cover: 5.1625x (prev. 4.8875x)
• Allotted at Highest Accepted Yld as % of Bid at that Yld (%): 66.7 (prev. 51)
• Bidders: 31 (prev. 41), 8 (prev. 13) successful, 2 (prev. 6) allocated in full

In Tokyo morning trade, JGB futures are flat compared to settlement levels after giving up overnight gains.

• This comes after BoJ Governor Ueda has made remarks at an event in Tokyo. The comments appeared to cover a lot of familiar ground since the last BoJ policy update. Ueda reiterated the driver of the recent downside forecast revisions for both growth and inflation (trade uncertainties). Still, the central bank will adjust the degree of monetary accommodation if the economy improves as expected.
• The Japan April services PPI printed at 3.1% y/y, versus a market forecast of 3.0%. The March read was revised higher to 3.3% (from 3.1% originally reported).
• Cash US tsys are flat to 2bps richer in today’s Asia-Pac session after yesterday’s holiday.
• Cash JGBs are flat to 12bps richer across benchmarks, with the curve flatter. The benchmark 40-year yield is 12.3bps lower at 3.435% ahead of tomorrow’s supply.
• The upcoming 40-year JGB auction will be closely watched following a lacklustre 20-year sale last week — a sign of the caution that still runs deep among long-end investors.
• Swaps have twist-flattened, with rates 1bp higher to 4bps lower. Swap spreads are wider.

The BBDXY range Friday night was 1207.66 - 1211.25, Asia is currently trading around 1209. The USD has opened weak again in early Tuesday trading in Asia. 

• While most other asset classes have managed to reverse all their losses related to Trump’s tariffs on Europe. The USD remains heavy and is languishing pretty near its lows.
• Bloomberg - “The turn against the US dollar is hardening as traders respond to President Trump’s volatile policymaking. That may also signal fresh weakness for equities and Treasuries stateside when they return to full action on Tuesday after Monday’s Memorial Day break.”
• “NATO will seek to adopt a new defense spending target of 5% of GDP at a June summit, Mark Rutte confirmed publicly for the first time, meeting a demand by Trump that had originally seemed unrealistic.”(BBG)
• Andreas Steno Larsen on X : “ A 25-30% weaker USD (over the next 1-2 years) solves most of Trump's problems, trade deficits will vanish. https://x.com/AndreasSteno/status/1925974036552499565
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows.
• Corporate month end is approaching and with it the normal demand for USD’s, this could provide better levels to fade back towards 1220/25 again.
• We are approaching some key Weekly support towards the 1200 area in the BBDXY. A break below here could signal the move is about to accelerate.
• Data/Events : Durable Goods, FHFA House Price Index, Conference Board, Dallas Fed Man Activity.