JPY: Yen Lags USD Sell-Off, USD/JPY Dips Supported By Firmer Global Equities
Yen notably lagged broader USD softness for Monday's session. Yen lost around 0.20% against the dollar, with USD/JPY currently sitting in the 157.55/60 region in early Tuesday dealings. USD/JPY did see a sharp pull back to 156.24 in Monday trade, post the Asia close, as the Washington Post suggested incoming US President Trump could water down his tariff plans. Broader USD sentiment recovered to some degree though, as Trump stated the report was fake news.
- Yen's 0.20% loss contrasts with the both the BBDXY and DXY indices off around 0.60-0.65% for Monday's session. This left yen comfortably the worst performer in the G10 space, with all the other majors up against the USD.
- For USD/JPY, technicals remain skewed higher in the pair. near term focus will rest on 158.08, the Dec 26 high from last year. The 20-day EMA is back at 155.89 on the downside.
- The advance in global equity markets on Monday, led by EU markets, likely weighed on yen relative to the rest of the G10, although US markets finished off highs as Trump denied the water down tariff plan. US yields were mixed, the front end softer, but back end yields held modest gains, the 10yr up to 4.62%.
- The local data calendar just has the Dec monetary base figures today, which is unlikely to move market sentiment.
- Market pricing for a BoJ hike at the Jan meeting remains under 50% priced at this stage, sub mid Dec highs. Governor Ueda reiterated yesterday the path for rates is higher but timing still remains uncertain. Note next Tuesday we hear from Deputy Governor Himino.
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Our latest Employment Insight has just been published and emailed to subscribers.
