JGBS: Bull-Flattener At Lunch, BoJ Gov. Ueda Due In Parliament
At the Tokyo lunch break, JGM5 futures are stronger and near session highs, +16 compared to settlement levels.
- BoJ's Ueda is set to appear in Parliament at 12:10 PM JT.
- In the bond space, offshore investors added further to their local debt holdings. This marked the fourth straight week of inflows into this space. JGB yields continue to track higher, but may also be attracting some safe haven related flows given global/US growth concerns. In terms of Japan outflows, we saw net selling of offshore bonds, but this only partially reversed the prior week's purchases.
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest sell-off.
- Cash JGBs are little changed across benchmarks out to the 5-year but 1-4bps richer beyond. The benchmark 10-year yield is 1.3bps lower at 1.511% versus the cycle high of 1.58%.
- Swap rates are flat to 1bp lower, with a flattening bias. Swap spreads are mixed.
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AUD: A$ Slightly Weaker But Range Trading Ahead Of Wed’s US CPI
AUDUSD fell to a low of 0.6265 following the presidential signing of US tariffs on steel and aluminium imports to begin on March 4 and news that tariffs on chips, pharmaceuticals and cars would now be considered. The pair had risen to around 0.6285 following news of a constructive conversation between Australian PM Albanese and US President Trump. Trump then stated that Australia was being considered for an exemption. AUDUSD is now around 0.6272 to be down moderately on the day. The USD index is 0.1% higher.
- AUDUSD and A$ crosses are range trading as markets wait for Wednesday’s US January CPI data, which is forecast to show a steady headline at 2.9% but a 0.1pp dip in core to 3.1%.
- AUDJPY is 0.1% lower at 95.31 after a trough of 95.08. AUDEUR is slightly down to 0.6090 but off the intraday low of 0.6083. AUDGBP is steady around 0.5076.
- AUDNZD is little changed at 1.1127 after a high of 1.1138 as both Australian and NZ governments spoke to avoid being targeted by US tariffs.
- Equities are mixed with the ASX & Hang Seng up 0.1% but CSI 300 down 0.3% and S&P e-mini -0.2%. Oil prices are higher with WTI +0.3% to $72.55/bbl. Copper is down 0.4% and iron ore is higher at $107-108/t.
- Later US January NFIB small business optimism prints and Fed Chair Powell testifies to the senate and Fed’s Hammack, Williams and Bowman speak. Q4 French unemployment is released and the ECB’s Schnabel appears, and BoE’s Mann & Bailey speak.
MNI EXCLUSIVE: BoJ Consensus On Inflation & Wages Difficult
NEW ZEALAND: NZ More Vulnerable To US Tariffs Than Australia
NZ has come out today and reiterated its close relationship with the US. Its economy is more vulnerable to American protectionism than Australia though, as the US became NZ’s second most important export destination in 2024 overtaking Australia. 12.7% of total NZ exports go to the US compared with 4.6% for Australia, but still around half of that going to China at 25%. On the other side, the US runs a very small trade deficit with NZ of $1.1bn in 2024 and only 0.2% of its imports are from NZ and so it is unlikely to be a tariff target.
NZ merchandise exports by destination % total 2024
