THB: USD/THB Off Highs, But Back To Flat For May, Softer Gold Weighing
Spot USD/THB is holding around 33.35/40 in latest dealings, the baht off around 0.45% versus end Wednesday levels (albeit away from session lows 33.48). The currency continues to lag recent USD index softness. Indeed, baht is now back to flat for May to date, only outperforming HKD and INR within region. We are above the 20-day EMA for USD/THB, while the 50-day is further north, close to 33.57.
- The weakness in gold is not helping the baht trend, with gold weakness correlating well with directional USD/THB shifts. Bullion is off a further 0.80% today back sub its own 50-day EMA, even as broader equity sentiment falters following the recent strong rebound.
- Portfolio outflows are still evident in the equity and debt spaces in May to date. This contrasts with other parts of the region, particularly on the equity front, where strong inflows have been seen. Thailand equities are up for May but have struggled for upside traction recently, with uncertainty/softness around the local economic backdrop not a positive.
- Next week Q1 GDP prints, the market expects a 0.6%q/q outcome, versus 0.4% prior. We still await the April consumer confidence print due today.
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JGBS AUCTION: Poor Demand Metrics For 20Y Auction
The 20-year JGB auction delivered poor results across key metrics. The low price underperformed dealer forecasts, which were set at 100.40 according to a Bloomberg poll. Moreover, the cover ratio decreased to 2.9639x from 3.4594x in the previous auction and the auction tail lengthened dramatically to 0.34 from 0.20.
- As noted in the auction preview, today’s offering featured an outright yield at a cycle high, 15bps higher than last month’s auction.
- Moreover, the 10/20 yield curve was at its steepest since 1999 and the 20-year JGB was at its cheapest valuation within the 10/20/30 butterfly since early 2023.
- As a consequence, this result is likely to be seen as significantly worse than the mixed performance observed in the 30-year JGB auction earlier this month.
- Post-auction, the 20-year JGB is little changed.
JGBS AUCTION: 20-Year JGB Auction Results
The Japanese Ministry of Finance (MOF) sells Y750.9bn 20-Year JGBs:
- Average Yield: 2.349% (prev. 2.278%)
- Average Price: 100.69 (prev. 96.20)
- High Yield: 2.374% (prev. 2.294%)
- Low price: 100.35 (prev. 96.00)
- % Allotted At High Yield: 40.8163% (prev. 44.1031%)
- Bid/Cover: 2.9639x (prev. 3.4594x)
JGBS AUCTION: 20Y Supply Faces A Cyclical High Yield & A Steeper Curve
The Japanese Ministry of Finance (MoF) will today sell Y1.0tn of 20-Year JGBs.
- Today’s 20-year JGB auction offers an outright yield at its cycle high, approximately 15bps above last month’s level.
- Moreover, the 10/20 yield curve has steepened dramatically over the past month, hitting its steepest since 1999.
- Additionally, the 20-year JGB has cheapened to its cheapest valuation within the 10/20/30 butterfly since early 2023.
- On the other hand, the auction comes amid souring sentiment toward long-term global bonds.
- Given these dynamics, it remains to be seen whether today’s supply can generate some positive momentum for JGB auctions or if market caution will weigh on demand.
- Results are due at 0435 GMT / 1235 JT.
