BOJ: VIEW: Danske Bank Look For Rate Hike In Q223
Danske Bank note that “Spring will be crunch time in Japan with the annual wage negotiations and a scheduled replacement of all three governors in BoJ. Based on Tuesday’s move, we think the probability of further moves next year has increased and we expect a move away from negative interest rates after a new Governor has been appointed, followed by a further loosening of the yield curve control. Specifically, we expect a policy rate hike to 0% in Q2 followed by a 25bp increase in the yield target to 0.25% and an increase in the fluctuation band from -0.25% to 0.75%.”
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AUSTRALIA: POLITICS: Argument Over Industrial Relations Bill Heats Up
The federal government is determined to pass its industrial relations bill in the two weeks before parliament breaks but it is struggling to get it through the senate. The fight between business and the government on this issue is intensifying, as concern grows that it will cost jobs, reduce productivity and close businesses, while PM Albanese says that the unease over the legislation is an overreaction.
- Industry groups are saying that the bill will increase costs which will then be passed on putting further pressure on the RBA to tighten. (SMH)
- Business groups have been united in strongly voicing their concerns at the multi-employer bargaining part of the legislation and increased risk of broader strike action. The mining industry is warning that the changes and new taxes could cost up to 33k jobs and risk investment, including the government’s energy transition projects. (The Australian)
- There is a lot of concern that the changes will be particularly hard on small businesses, as they will not have the flexibility to pay the wages that fit their circumstances but will have to pay the same as their larger counterparts.
- The legislation has passed the lower house of parliament but needs cross-bench support in the senate. The government is arguing that it is needed to boost wage growth, which rose 3.1% y/y in Q3. It is prepared to add additional sitting days to get it through before the break, according to The Australian.
- The senate inquiry into the bill reports on Tuesday.
JGBS: Futures A Touch Lower Overnight, Rinban Due, Further Headwinds For Kishida
Weakness in U.S. Tsys applied some modest pressure to JGB futures in the final overnight session of last week, with the contract finishing just above worst levels of the session, -12 vs. Friday’s Tokyo settlement levels.
- Local headline flow sees continued headwinds for Japanese PM Kishida, after the minister for internal affairs and communications stepped down over the weekend, in the wake of revelations surrounding campaign finance irregularities. This threatens to put a further dent in Kishida’s approval ratings, which have already plummeted.
- Global core FI markets have seen a light bid crept in during recent trade, with Fedspeak and the COVID situation in China helping the firming. This may support JGB futures and limit any losses in cash JGBs after the Tokyo open.
- BoJ Rinban operations covering 1- to 10-Year JGBs headline the domestic docket today.
JGB TECHS: (Z2) Broadly Flat on the Week
- RES 3: 152.26 - High Dec 7 / 21 2021
- RES 2: 151.13 - High Mar 3
- RES 1: 150.81 - High Aug 5
- PRICE: 149.37 @ 15:48 GMT Nov 18
- SUP 1: 147.38 - Low Oct 21
- SUP 2: 147.07 - Low Jun 20
- SUP 3: 145.05 - Low Jun 16 and a key support
JGB futures traded solidly into the Friday close. This works against the previous bearish primary trend direction. Key resistance has been defined at 150.81, the Aug 5 high where a break is required to suggest a stronger reversal. A reversal lower would signal a resumption of the primary downtrend and this would open 147.07, the Jun 20 low (cont).
