SOUTH KOREA: Yields Track Global Leads, 3Yr Yields to Remain Elevated
- As JGB futures open strong again Friday, SK bond futures have followed the lead higher and have gained for four days straight.
- Earlier this week we noted momentum for yields on the upside was firm but value demand might emerge in a risk off scenario or directional change in JGBs. See here post from the start of the week https://www.mnimarkets.com/articles/near-term-bias-for-higher-as-valuations-looking-attractive-1770607777752
- 10-Yr bond futures are up +.37 at the open as equity sentiment appears heavy for the day ahead.
- SK government officials have commented on SK bond yields (specifically 3-Yr) in recent day suggesting its is 'just market forces'.
- From a Feb 9 high of 3.27% the KTB 3-Yr yield has declined -14bps in recent days currently near 3.13%
- Yields in the 1-3 year maturities have been impacted by vast issuance by the government in the first 6 weeks of the year. The turn lower is driven by correlations to JGBs which are rallying given the easing of fiscal concerns.
- The issuance in the front seems set to continue, putting a floor under yields. We see cause of 3% as a natural floor in the 3-Yr thanks to global leads, but ultimately yields to stay elevated due to government bond issuance.
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CRYPTO: Bitcoin - Attempting To Regain Upward Momentum By Breaking 95k-96k
Bitcoin had a range overnight of $91,692.62k - $94,490.09k, Asia is currently trading around {XBTUSD Curncy}. Bitcoin and Crypto have finally started to react to the broader “debasement trade” as metals start to go parabolic. Is the imminent ruling by the Supreme court on the legality of Trump’s tariffs adding to this ? Whatever the reason crypto bulls would be giving a sigh of relief as a short-term base looks to have been put in and it is attempting to re-establish some upward momentum. It is pushing up through some important resistance around 95k, should this be sustained it's likely we could have a look back toward the 100k-105k pivotal area. I suspect we will see some selling return in this area and it would need to do some work to clear it.
- Passed Pawn on X: “Why might this time be different? 1. It lagged the debasement narrative rallies in other assets, especially precious metals. 2. Positioning cleansing after 10/10 has had time to run its course. 3. It's well suited for the geopolitical environment. Bitcoin will still trade with tech and I don't expect a decoupling. But a catch-up seems like a decent bet.”
- Bitcoin’s Average True Range(ATR) for the last 10 Trading days: $2,255
Fig 1: Bitcoin spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE BONDS: ACGB Oct-36 Auction Prints Below Mids But Less Demand
Today’s auction result extended the recent trend of firm pricing for ACGBs, with the weighted average yield printing 0.22bps through prevailing mids, according to Yieldbroker. However, demand was weaker, as reflected by a cover ratio of 3.1950x, down from the prior 3.7100x.
- The tapering in demand came with the bond’s outright yield hovering around its cycle high, unchanged from the previous outing.
- However, the 3/10 yield curve was around its flattest level since March, approximately 30bps flatter than at the time of its syndicated sale.
- The recent deterioration in sentiment toward longer-dated global bonds may have also hindered demand.
- In the wake of the auction, the ACGB Oct-36 is little changed.
USD: BBDXY - Still Within 1205-1215 Range, Supreme Court Decision Imminent
The BBDXY range overnight was 1208.76 - 1212.52, Asia is currently trading around {BBDXY Index}. The USD largely ignored the softer CPI and drifted back up albeit within its range. On the day, it looks like more of the same while we trade within the 1205-1215 range, watch for any ruling from the Supreme court as well as a potential incursion into Iran to maybe provide a catalyst. This lack of a trend is being reflected in the CFTC data which shows very little positioning in the USD Index to start the year. A break above 1215-1216 could signal the potential for a deeper pullback.
- Reuters - “Bank of England scrutinizes lenders for dollar risk amid Trump worries, sources say. “In a global dollar funding crisis, the Fed might hesitate to offer swaps for fear of strong Trump reaction – its priority is monetary policy independence, after all," said Richard Portes, professor of economics at London Business School and former Chair of the European Systemic Risk Board's Advisory Scientific Committee. ca.finance.yahoo.com/news/exclusive”
- Polymarket on X: “ 73% chance the Supreme Court declares Trump's tariffs illegal tomorrow.”
- The BBDXY Average True Range for the last 10 Trading days: 334 Points
Fig 1: BBDXY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
