JGBS: Futures Little Changed Overnight, US Tsys Bear-Steepen
Apr-08 23:32
In post-Tokyo trade, JGB futures closed little changed, +2 compared to settlement levels.
- Volatility remained high overnight as tariff uncertainties continued to roil the markets as the reciprocal levies went into effect at midnight.
- Trump officials confirmed 104% added tariff on China went into effect at noon, with WH press sec Leavitt adding that additional tariffs are to be collected starting today.
- Concurrently, China vowed to "fight to the end". Notably, the PBoC yesterday allowed the offshore yuan to fall to a record low, testing 7.4153 versus the dollar.
- Wall Street finished with steep losses but edged off their lows into the close.
- US tsys finished mostly weaker, with curves twisting to the steepest levels in over three years (2s10s tap 55.157 high). The US long end was hit hard with the 30-year cheapening by 15bps. The 10-year was 11bps higher at 4.29%, while the 2-year yield richened 4bps to 3.73% on haven demand and rate cut bets.
- Today, the local calendar will see Consumer Confidence and Machine Tool Orders data alongside BoJ Rinban Operations covering 1-3-year and 5-25-year JGBs.
- BoJ Governor Ueda will also give a speech at the Trust Companies Conference (15:15 JT).
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CHINA: CPI and PPI Now in Deflation.
Mar-09 23:26
- Over the weekend China’s February PPI and CPI was released showing deflation is firmly entrenched in the economy.
- PPI has been stuck firmly negative for multiple years now, showing the challenges companies face after 29 consecutive months of decline.
- For CPI it was the first time it had fallen back into deflation in over a year.
- Data across the region has been distorted by an earlier than usual Lunar New Year impacting the year on year data.
- Despite this consumer inflation is still at lows in recent months with core down and services inflation in decline.
- CPI declined -0.7%, down from 5% in January, worse than consensus of -0.4%.
- Food prices declined -3.3%, consumer goods down -0.9%, services down -0.4% and new energy vehicles down 6%
- China has set its inflation target at the lowest level in two decades at 2% for 2025 as authorities recognizes the challenges ahead.
- The numbers put pressure on the authorities to act with a fiscal and monetary response and it is anticipated that policy changes could be announced soon.
- The Government has set the GDP target for 2025 at 5% with increased spending and bond issuance for regional governments agreed.
STIR: RBA Dated OIS Pricing Softer Today But Mixed Vs. Pre-RBA Decision Levels
Mar-09 23:20
RBA-dated OIS pricing is flat to 2bps softer across meetings today.
- Nevertheless, pricing remains mixed compared to February’s pre-RBA Decision levels—meetings through May are 3-4bps firmer, while those beyond are 1-16bps softer.
- A 25bp rate cut in April is given a 9% probability, with a cumulative 65bps of easing priced by year-end (based on an effective cash rate of 4.09%).
Figure 1: RBA-Dated OIS – Today Vs. Pre-RBA Levels
Source: MNI – Market News / Bloomberg
AUSSIE 10-YEAR TECHS: (H5) Reverses Off First Resistance
Mar-09 23:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.740/851 - High Mar 4 / High Dec 11
- PRICE: 95.570 @ 14:40 GMT Mar 7
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures have faded sharply off the mid-week high, opening a small gap with first resistance. For bulls, a confirmed reversal and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
