JPY: USD/JPY - Building On Gains Above 157.00
The USD/JPY range today has been 156.88 - 157.47 in the Asia-Pac session, it is currently trading around 157.35, +0.15%. The pair continued to extend higher in our session as dips remain well supported. This price action will certainly worry officials as this acceleration above 155 looks ominous and on track for a very quick test of the 160 highs seen in 2024. Japan is in a tough bind, they want to provide a significant stimulus package to boost the economy, they want to cap bond yields and they also do not want USD/JPY to explode higher. Some would say that is an impossible task and they will have to let something go, the easiest lever to pull back on is the Yen. This will not make the US happy but it's a far easier and palatable outcome than bond yields getting out of control. I suspect they will have to show some sign of fighting this above 160, but given the current inputs this could potentially go a lot higher than that.
- MNI AU - Koeda - Gives Upbeat Comments On Inflation But No Hint On Rate Hike Timing: Headlines have crossed from BoJ board member Koeda's speech. At first glance they appear in line with recent rhetoric from key BoJ board members. There were some hawkish undertones, with Koeda noting that the central bank must normalize rates to avoid distortions in the future and that underlying inflation is around 2%. She didn't give any hints on rate hike timing (which is hardly surprising ahead of Ueda's speech on Dec 1).
- "JAPAN’S 30-YEAR YIELD HITS FRESH RECORD HIGH SINCE 1999 DEBUT" - BBG
- “JAPAN CHIEF CABINET SECRETARY KIHARA: WATCHING MARKET MOVES, INCLUDING BOND MARKET, CLOSELY. RECENT FX MOVES ARE SHARP, ONE-SIDED" RTRS
- “KATAYAMA: HARD TO STRIKE BALANCE BTWN PRICES, RATES, WEAK YEN. RATES, FX ARE DECIDED BY MARKET ON VARIOUS FACTORS" - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 155.00($1.49b). Upcoming Close Strikes : 155.00($933m Nov 21), 155.00{$824m Nov 24), 156.00($795m Nov 21) - BBG.
- The USD/JPY Average True Range(ATR) for the last 10 Trading days: 105 Points
Fig 1 : USD/JPY Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUSTRALIA: Improved Q3 Job Ads May Signal Better Q4 Labour Market
SEEK data show that labour demand improved over Q3 while supply remains positive it slowed. With Q3 employment rising only 0.2% q/q down from Q2’s 0.6%, SEEK job ads may be signalling some possible improvement over Q4. A stabilisation of the labour market would be helpful for monetary policy decision makers if inflation prints to the upside.
Australia SEEK job ads %
- September SEEK new job ads rose 1.1% m/m, the third straight monthly increase. Ads increased 1.7% q/q in Q3 a clear pick up after Q2’s 0.6% q/q contraction. They are still down 2.4% y/y in September but that follows -12.6% y/y in March and is the best result in almost three years.
- Applicants per job were little changed in August rising 0.1% m/m and 10.9% y/y following July’s 2.8% m/m & 11.7% y/y. It seems that growth in labour supply slowed in Q3 after rising 4% q/q in Q2. In Q3, the labour force grew 1.8% y/y while employment was up 1.5% y/y.
- SEEK noted that a number of large industries had increased job ads including trades & services, manufacturing and transport & logistics. Professional and financial services continue to decline.
Australia SEEK applicants per job 2013=100
Source: MNI - Market News/SEEK
JGBS: Modestly Richer, Oct 30 BOJ Hike At 25% Chance
JGB futures are stronger, +16 compared to the settlement levels, but off session bests.
- Cash US tsys are slightly mixed, with a flattening bias, in today’s Asia-Pac session after yesterday's gains.
- Cash JGBs are slightly richer across benchmarks, with yields 1-2bps lower. The benchmark 10-year yield is 1.0bp lower at 1.664%, outperforming the futures-linked 7-year. This continued the recent trend, which has unwound the relative cheapening of the 10-year earlier in the year.
- Japan sold ¥300bn of 10-year climate transition notes at a cut-off yield that was lower than expectations, signalling lacklustre investor demand. The cut-off yield was 1.680%, compared with 1.695% estimated by traders in a Bloomberg survey. The bid-to-cover ratio was 3.56x, compared with 3.31x in October 2024, the last time the government sold the bonds.
- Swap rates are little changed.
- BOJ-dated OIS pricing is little changed across 2025 meetings compared to early August levels. Pricing is, however, firmer for 2026 meetings out to July. Current OIS pricing implies just a 24% probability of a 25bp hike in October, rising to 65% by December and 82% by January. A full 25bps hike is not fully priced until March 2026. (see chart)
- Tomorrow, the local calendar will see Trade Balance data.
Figure 1: BOJ-Dated OIS – Today Vs. August 1
Source: Bloomberg Finance LP / MNI
US TSYS: Treasuries Trend Sideways in Lacklustre Trading Day
Having finished the overnight US session modestly higher, US Treasury futures failed to follow on with TYZ5 remaining where it opened at 113-19 and USTs moves modest at best.
- The US 2-Yr did very little during the Asian trading day, trending marginally higher to 3.46%
- The US 5-Yr had finished -2bps lower at 3.57% during the US trading day where it remained.
- The US 10-Yr slipped back below the 4.00% overnight, finishing at 3.98% where it has held during the day today with eyes on it overnight to see if it can consolidate below 4.00%.
- The USD 30-Yr was strong overnight rallying 3bps to 4.57%, and continued on in Asia down again to 4.56% The 30-Yr is now back at levels of April.
The key data releases tonight are the Philadelphia Fed Non-Manufacturing Activity, Redbook retail sales and MBA Mortgage Applications.
