JGBS: Cash Bonds Slightly Richer, Initial Rengo Wage Outcome Due
Mar-14 01:06
In Tokyo morning trade, JGB futures are higher, +27 compared to settlement levels.
- Today, the local calendar will be empty apart from Auction for Enhanced-Liquidity 1-5 years.
- Cash Us tsys are ~1bp cheaper so far in the Asia-Pac session after yesterday’s modest rally.
- This week BoJ Governor Ueda largely delivered a repeat of previous hawkish statements. While no change is expected at next week’s BoJ meeting, the timing of recent messaging suggests the decision will come with a hawkish outlook. This may see the markets ramp up expectations for the decision due on May 1, from its current stance of July. It is also noteworthy that the BoJ raised interest rates last year shortly after Rengo published its initial count of wage rises (due today).
- Cash JGBs are flat to 2bps richer across benchmarks, with the futures-linked 7-year leading. The benchmark 10-year yield is 1.4bps lower at 1.534% versus the cycle high of 1.58%.
- Swap rates are flat to 2bps higher, with a steeper curve. Swap spreads are wider.
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ASIA STOCKS: Equity Flows Muted On Tuesday, India Continues To See Selling
Feb-12 00:28
Muted flows on Tuesday, with small inflows into most regions, however India continues to see outflows with a total outflow ytd of $9.5b.
- South Korea: Recorded +$84m in inflows yesterday, bringing the 5-day total to -$40m. YTD flows remain negative at -$1.40b. The 5-day average is -$8m, better than the 20-day average of -$87m but worse than the 100-day average of -$137m.
- Taiwan: Posted +$186m in inflows yesterday, bringing the 5-day total to +$1.39b. YTD flows remain negative at -$2.49b. The 5-day average is +$279m, better than the 20-day average of -$95m and the 100-day average of -$71m.
- India: Recorded -$262m in outflows yesterday, bringing the 5-day total to -$740m. YTD outflows remain significant at -$9.58b. The 5-day average is -$148m, better than the 20-day average of -$348m but worse than the 100-day average of -$186m.
- Indonesia: Posted -$29m in outflows yesterday, bringing the 5-day total to -$290m. YTD flows are negative at -$547m. The 5-day average is -$58m, worse than the 20-day average of -$19m and the 100-day average of -$15m.
- Thailand: Saw +$30m in inflows yesterday, bringing the 5-day total to +$74m. YTD flows remain negative at -$256m. The 5-day average is +$15m, better than the 20-day average of -$10m and the 100-day average of -$16m.
- Malaysia: Registered +$21m in inflows yesterday, bringing the 5-day total to -$38m. YTD flows are negative at -$740m. The 5-day average is -$8m, better than the 20-day average of -$33m but worse than the 100-day average of -$26m.
- Philippines: Recorded -$11m in outflows yesterday, bringing the 5-day total to -$3m. YTD flows remain negative at -$104m. The 5-day average is -$1m, in line with the 20-day average of -$3m and the 100-day average of -$3m.
Table 1: EM Asia Equity Flows
AUSSIE BONDS: Solid Digestion Of May-41 Supply
Feb-12 00:18
The latest ACGB May-41 supply auction continued the recent trend of firm pricing, with the weighted average yield printing 0.22bps through prevailing mids (per Yieldbroker).
- The cover ratio increased to a robust 3.7875x, reflecting solid demand.
- Today's auction was likely bolstered by steeper 3/10 and 10/20 yield curves and the recent improvement in sentiment toward longer-dated global bonds.
- In early post-auction trading, XM futures and the bond line have shown little movement.
JPY: USD/JPY Pressing Higher, Close To 153.00, Ueda In Parliament Soon
Feb-12 00:13
USD/JPY is continuing to recover, the pair last near 152.90, near session highs and up 0.30% versus end NY close levels from Tuesday trade. Japan markets return today after yesterday's public holiday, so there could be some focus on the Tokyo fix, as last week USD/JPY tracked lower in the lead up to the fixing. Other G10 movements are close to unchanged at this stage.
- For USD/JPY technicals, we are testing the Feb 6 highs of 152.89. Note the Jan 27 low of 153.72 is a further potential upside target. The 50-day EMA is back at 154.70. Note as well some option expiries today (for NY cut later), Y153.00-15($884mln), Y153.50-70($1.7bln), which could influence spot.
- The firmer core yield backdrop is aiding the USD/JPY rebound, weakness in yen against crosses. US-JP yield differentials have ticked up from recent lows, the 10spread more so than the 2yr. The 10yr was last +321bps, against recent lows of +313bps.
- BoJ Governor Ueda will appear in parliament at 10:05am local time, so in just under an hour.
