US TSYS: J.P.Morgan On End-Of-Month Supply Matters
Ahead of Thursday’s end-of-month supply announcement J.P.Morgan expect “Treasury to announce $42bn 2-Year notes, $43bn 5-Year notes, and $35bn 7-Year notes, unchanged in size from last month, and we also project $22bn reopened 2-Year FRNs, unchanged since last reopening auction in December. We think the 2-, 5-, and 7-Year rolls should open at -2.125bp, -2.0bp, and -1.125bp, respectively.”
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CHINA REVISED 2Q 2022 GDP TO -2.4% Q/Q FROM PREV -2.6% Q/Q
- CHINA REVISED 2Q 2022 GDP TO -2.4% Q/Q FROM PREV -2.6% Q/Q
- CHINA REVISED 1Q 2022 GDP TO +1.3% Q/Q FROM PREV +1.4% Q/Q
USD: USD Softens On China Data Beats, But Not Much Follow Through
Higher beta FX has nudged higher post the China data beats, but there hasn't been much follow through. China Q4 GDP was flat, versus market expectations of a contraction, while monthly indicators were also better than expected for Dec. IP rose by 1.3% y/y (versus 0.1% expected), while retail sales fell by -1.8% y/y (-9.0% forecast).
- AUD/USD got close to 0.6980, versus 0.6965 pre data. It remains the best performer within the G10 space so far today (+0.30%). NZD is playing catch up though, last near 0.6400.
- USD/JPY has drifted a touch lwoer, but remains up for the session, last near 128.70.
- USD/CNH is back sub 6.7500, we got close to 6.7600 pre the data. 1 month USD/KRW is back to the 1236 region, against 1239/40 prior to the data prints.
- The BBDXY is back softer for the session, last around 1226.30.
JGBS: Futures Coil, Cash Mixed, Swap Rates Lower
JGB futures nudged away from worst levels of the Tokyo morning, failing to deviate meaningfully from late overnight session levels, hitting the lunch bell +12. Cash JGBs out to 20s were mixed, with 10-Year yields continuing to show through the upper limit of the BoJ’s permitted YCC band for a third straight day (further evidence of basis trades vs. futures being at work). 30+-Year paper was richer.
- Receiver side swap flows seemed to limit any selling pressure in the space, with benchmark rates on that curve running 1.5-2.5bp lower, potentially pointing to a paring back of positioning into tomorrow’s BoJ decision.
- There hasn’t been anything to add from a domestic fundamental perspective vs. our earlier bullets, with the space also looking through the latest GDP print out of China, as participants focus on idiosyncratic matters.
