IDR: USDIDR Breaks Above 20-day EMA
Oct-23 03:29
- Bank Indonesia surprised markets holding rates steady yesterday, with only 9 of 39 economists on BBG predicting a maintenance at 4.75%.
- The BI has had a challenging environment supporting USDIDR, failing to achieve its stated target of 16,300.
- The Rupiah had held a stable path over the past fortnight, in line with the 20-day EMA yet the surprise hold sees it weaker by -0.31% at 16,638 as BBG quotes one of the leading forecasters who is suggesting that 17,000 is now a possibility.
- The BI has been eating into their FX Reserves in recent months, but by historical comparisons, they still remain very high.
- USDIDR did weaken to 16,891 at the onset of the US trade war, before recovering to 16,115 in August. Since then it has struggled to perform despite the Jakarta Composite up over 10% over that time and the 10-Yr bond yield at all time lows.
- The JCI has reacted positively to the hold up +1.1% and outperforming regional peers, whilst bond markets are higher in yield across the curve by 2-3bps. The 10-Yr is at 5.99%.
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JAPAN: Koziumi Still Seen As Favorite For LDP Leadership Race
Sep-23 03:28
Earlier headlines crossed from Japan LDP leadership candidates. Notably from Takaichi we got, via Rtrs, :"JAPANESE PM CONTENDER TAKAICHI: WILL USE TAX REVENUES TO FUND TAX CUT, SPENDING FOR STEPS TO COMBAT RISING PRICES BUT IF NECESSARY, SHOULD ISSUE BONDS.
- This fits with Takaichi's known fiscal expansion viewpoint. Still, she sits well down per Polymarket odds, last around 28, off recent highs.
- Koizumi continues to lead, last at highs of 70 (since the LDP election was called a few weeks ago), see the chart below (Koizumi odds are the white line, Takaichi the orange line). Still, Takaichi remains the top pick among onshore opinions.
- Koizumi noted earlier: KOIZUMI: MUST BE MINDFUL OF NEED FOR FISCAL DISCIPLINE, BUT ACHIEVING SOLID ECONOMIC GROWTH IS BASIS FOR GUIDING SOUND FISCAL POLICY - [RTRS]"
- His remarks are more in line with a status quo fiscal outcome, although changes can't be ruled out.
- The JGBs 2/30s curve has flattened of late, last +225bps, we were around +245bps in early September. Nevertheless, the 2/30 curve remains near its steepest since 2005.
- The LDP election is scheduled for Oct 4.
Fig 1: Koizumi Clear Front Runner For LDP Leadership Race - Per Polymarket
Source: Polymarket/Bloomberg Finance L.P./MNI
AUSSIE BONDS: AU-US 10Y Diff In Top Half Of Range
Sep-23 03:19
Cash ACGBs are 2bps cheaper today.
- The AU-US 10-year yield differential is currently around +12bps, placing it in the top half of the ±30bps range that has persisted since November 2022.
- A simple regression of the 10-year yield differential against the AU-US 1-year forward 3-month swap rate (1Y3M) differential over the past two years suggests that the current spread is close to fair value.
- The 1Y3M differential, a key measure of expected relative policy paths over the next 12 months, has increased by approximately 60bps since June, reaching a level similar to October 2024.
Figure 1: AU-US Cash 10-Year Yield Differential (%)
Source: Bloomberg Finance LP / MNI
MNI EXCLUSIVE: A EU Business Leader In China Discusses Trade Relations
Sep-23 03:06
A European business leader in China discusses current trade relations between Brussels and Beijing On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
