KRW: USD/KRW Supported On Dips, Close To Top End Of Downward Trend Channel**
** Updated source at bottom of Chart
Spot USD/KRW has been supported on dips so far in Wednesday trade. We were last near 1370, just off session highs (1372.6). Earlier lows were at 1362.35, as the won rallied with onshore equities. The Kospi is off earlier highs, but still up +0.70% for the session. Offshore investors have been net buyers of local stocks today, but at $145.3mn, the pace of inflows appears to be slowing.
- For spot USD/KRW, we look to be close to testing the topside of a downtrend channel, that has roughly been in place since April, see the chart below. Still, the downtrend channel has been fairly steep in terms of the descent, so some stabilization may not be surprising, as some sell-side names have been arguing for.
- This also comes after the reports that the NPS is no longer selling USDs for hedging purposes in light of the correction lower in USD/KRW.
Fig 1: Spot USD/KRW Threatening Top End Of Downtrend Channel
Source: MNI - Market News/Bloomberg Finance L.P
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US TSYS: Asia Wrap - Yields Extend Higher
TYM5 has traded lower within a range of 110-15+ to 110-19+during the Asia-Pacific session. It last changed hands at 110-19, down 0-07 from the previous close.
- The US 2-year yield is higher, dealing around 3.91%, up 0.02 from its close.
- The US 10-year yield is higher, dealing around 4.40%, up 0.02 from its close.
- (Bloomberg) -- “Hedge funds aggressively added to net short positioning in 10-year note futures, while asset managers boosted longs in the sector in the week up to May 6, CFTC data shows.”
- Several regional small and medium-sized banks in China have lowered deposit interest rates in a bid to further reduce funding costs, according to Securities Daily. Following the adjustment, interest rates on certain banks’ three- and five-year medium- to long-term deposits have fallen below 2%. Analysts anticipate this downward trend will persist, citing ongoing pressure from narrowing interest rate spreads, the report said.
- Yields have all moved higher this morning as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland.
- The 10-year Yield range seems to be 4.10% - 4.5%, price has bounced nicely off the 4.25/30 support, target back towards the top end of the range 4.45/50%.
- Data/Events : US CPI Tomorrow
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JGBS: Bear-Steepener, Trade Deals In Focus
At the Tokyo lunch break, JGB futures are weaker, -43 compared to the settlement levels, hovering just session lows.
- Outside of the previously outlined trade balance data, there hasn't been much by way of domestic drivers to flag.
- Today’s heavy session aligns with US tsys, which are trading 2-3bps cheaper in today's Asia-Pac session as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland. US Treasury Secretary Bessent said there had been 'substantial progress' in the two days of talks with China and that further details would be shared today.
- “Japan won’t accept any initial trade agreement with the US that excludes auto tariffs, according to Prime Minister Shigeru Ishiba. Ishiba on Monday made his stance clear when asked in parliament about the possibility that Washington might urge Tokyo to strike a provisional agreement that doesn’t address US tariffs on car imports.” (per BBG)
- Cash JGBs are 2-8bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 4bps higher at 1.409% versus the cycle high of 1.596%.
- Swap rates are 2-6bps higher, with swap spreads mixed.
