PHP: USD/PHP Rebounds Back Above 57.00 As Onshore Markets Return
Onshore Philippine markets have returned today. The early bias is for USD/PHP to trade firmer, although near 57.06 in latest dealings keeps us within recent ranges. Wednesday highs were near 57.37, while lows this week were around 56.97. For the past week PHP is little changed, around mid -range from USD/Asia standpoint.
- Local equities were last near flat, with the PSEI remaining under 6300. The local equity index is still close to recent lows and has underperformed other markets, most notably Indonesia, through August to date.
- USD/PHP looks reasonably well aligned with US real yield levels, which were last at +1.94%, up from earlier August lows of 1.85%. Fed easing expectations have been tempered in the past week, amidst inflation concerns and resilient US data outcomes. Focus will be on Powell's speech tonight at Jackson Hole for further clues.
- Next week we have the BSP decision on Thursday. The consensus looks for a 25bps cut, which would take the policy rate to 5.00%.
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JAPAN: Local Media States PM Ishiba To Resign In August
Headlines have crossed from local newspaper Mainichi that PM Ishiba will resign by the end of August. Via Rtrs: "Japan's Prime Minister Shigeru Ishiba has made up his mind to resign, Mainichi newspaper reported on Wednesday."
- Earlier PM Ishiba wouldn't be drawn on speculation around his future, stating that he would assess the US-Japan trade deal details before making any decision.
- Still, in the aftermath of the weekend upper house result, which saw the ruling LDP coalition lose its majority, Ishiba's future has been speculated on.
- His removal odds per Polymarket has remained elevated this week, but sub recent highs.
- The market reaction has been for USD/JPY to rise, testing up through 147.00 (highs were at 147.20, but we sit back near 147.00 in latets dealings)Japan equities have also rallied further.
- JGB yields are higher across the curve so far today, with focus on the 40yr debt auction in a little while. Risks around fiscal slippage for Japan will remain elevated if Ishiba resigns.
JGBS AUCTION: 40Y Supply Faces Higher Yield But Flatter 10/40 Curve
The Japanese Ministry of Finance (MoF) is set to auction 400 billion of 40-year JGBs today. The previous 40-year auction of 500 billion was held on 28 May 2025.
- Today’s auction follows the announcement of a new trade deal between the U.S. and Japan. President Trump stated that Japan will invest $550 billion into the U.S. and open its markets further to U.S. car and agricultural exports. As part of the deal, Japan will impose a 15% reciprocal tariff on U.S. goods, lower than the previously threatened 25% rate.
- Cash JGBs are 3–8bps cheaper across the curve, with the benchmark 40-year yield up 3.4bps to 3.411%, compared to its recent cycle high of 3.60%.
- The current 40-year auction yield is tracking about 30bps higher than the previous auction.
- However, the 10s40s curve has flattened 30bps since reaching its recent peak.
- Results are due at 0435 BST / 1235 JST.
JGBS AUCTION: PREVIEW - 40-Year JGB Auction Due
The Japanese Ministry of Finance (MoF) is set to auction ¥400 billion of 40-year JGBs today. The previous 40-year auction of ¥500 billion was held on 28 May 2025.
- The auction achieved a cover ratio of 2.2114x, with a high yield of 3.135%, a low price of 99.20, and 33.3333% of bids allotted at the high yield.
- The previous auction was notably weak, with the high yield clearing well above dealer expectations. According to a Bloomberg survey, the market anticipated a yield of 3.085%, while the actual result came in at 3.135%.
- The auction’s cover ratio declined sharply to 2.2114x, down from 2.9203x at the previous issuance and marking the weakest demand since July 2024.
- Results are due at 0435 BST / 1235 JST.
