RBA: VIEW: NAB: No Change In View After Recent Data
In the wake of the labour market report NAB note that 2today’s strong outcome bucks the trend slowing in employment growth over recent months, which was difficult to square with still very elevated labour demand indicators and employment intentions in the NAB Business Survey. It may mean there could be some catchup in official employment growth in the months ahead. Overall today’s data is a strong report, and while not inconsistent with the RBA’s near-term outlook, does skew the risks towards stronger near-term outcomes on the labour market and wages. In the context of the strong WPI print yesterday, the case for 25bp hikes in December, February and March, as is NAB’s call, looks even firmer. Although we expect 25bp, we also think the RBA could again debate the merits of a 25 vs 50bp rise at the December meeting.”
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US TSY FUTURES: TY Blocked
Latest block trade lodged at 03:41:07 London/22:41:07 NY:
- TYZ2 1.8K lots blocked at 110-27+, looks like a seller.
JGBS AUCTION: PEVIEW: 20-Year JGB Supply Due
The Japanese MOF will today sell Y1.2tn of 20-Year JGBs opening JB#182. The MOF last sold 20-Year debt on September 15, the auction drew cover of 2.506x at an average yield of 0.894%, average price of 100.09, high yield of 0.945%, low price of 99.25, with 96.6666% of bids allotted at the high yield.
- This auction comes on the heels of last month’s poorly received 20-Year offering.
- Outright 20-Year yields have registered fresh cycle highs during this morning’s Tokyo session, which is a positive in isolation (and reflects some pre-auction concession), although ongoing market volatility, inflationary worry and the lack of relative BoJ control over this zone of the yield curve present some headwinds to supply.
- We also not that the 10-/20-/30-Year butterfly trades at cycle cheaps, although this could be indicative of weaker structural demand for this zone of the curve, even as 20s offer the most attractive carry and roll proposition on the curve at present (vol. negates a chunk of the carry appeal).
- A reminder that domestic life insurers and pension funds have indicated a willingness to take on added super-long JGB exposure given the ongoing global market volatility and elevated FX hedging costs.
- Once again, the strength of this auction will ultimately depend on the headwinds from ongoing market volatility vs. appetite of domestic life insurers and pension funds.
- Results due at 0435BST/1235JST.
AUD: Softer Commodities/Equities Send The A$ To Session Lows
AUD/USD is around session lows, close to 0.6280 currently. This is -0.15% below NY closing levels, with an overall range of close to 40pips for the session so far.
- Commodities are tracking lower, with iron ore futures at fresh YTD lows, back to the low $91/tonne region. China hot-rolled coil and steel rebar futures are also off by more than 1% today and threatening fresh lows.
- As we noted yesterday, A$ correlation with commodities, particularly with iron ore, aren't that strong at the moment, but today's moves will no doubt be impacting sentiment to a degree.
- Headwinds to the China growth outlook appear to be driving sentiment. Onshore equities are lagging the rest of region, with the Shanghai Composite property sub-index down modestly, despite the Securities Times reporting more cities in China have cut mortgage rates.
- Regional equities are comfortably off earlier highs as well, giving up solid gains from the open, which has weighed on the A$ as well.
