JGBS: Market Reverse Post-CPI Weakness After BoJ SoO
Mar-28 00:25
In Tokyo morning trade, JGB futures are stronger, +15 compared to settlement levels, after the market reverses the opening gap lower following higher-than-expected Tokyo CPI data. The BoJ Summary Of Opinion for the March meeting appears to have been the catalyst.
- “Some board members gathered to decide policy noted the need for caution as risks stemming from US trade policies were seen to be rising, according to a brief record of the Bank of Japan’s March meeting.” (per BBG)
- The Tokyo March CPI printed above market forecasts. The headline rose 2.9%y/y, versus 2.7% forecast. The prior month was revised down a touch to 2.8% (initially reported as a 2.9% rise). The ex-fresh food measure was also above expectations at 2.4%y/y (2.2% was the forecast, which also the Feb read). The ex-fresh food and energy measure rose 2.2%y/y, against a 1.9% forecast.
- Cash US tsys are slightly richer in today’s Asia-Pac session after yesterday’s modest gains.
- Cash JGBs have bull-flattened across benchmarks, with yields 1-3bps lower. The benchmark 10-year yield is 0.8bp lower at 1.581% versus the cycle high of 1.596%.
- Swap rates are flat to 3bps lower.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS: Tsys Yields Open Richer, 10yr at Ytd Lows
Feb-26 00:24
- Cash tsys have opened a touch richer again in Asia, continuing the moves from overnight. The 10yr is -1bps at 4.287% the lowest for the year and now back at mid dec levels, we have now seen a almost 50bps move lower from the Jan highs of 4.80%, and 37bps lower from the Feb highs
- Overnight, The Fed's Barkin emphasized the need for a cautious, modestly restrictive monetary policy stance until inflation convincingly returns to 2%, citing risks from fiscal deficits, labor market trends, and potential policy shifts under Trump. While acknowledging progress in reducing inflation, he warned of longer-term inflationary headwinds and uncertainty, advocating a "wait and see" approach before making further policy adjustments.
- Atlanta Fed President Raphael Bostic is scheduled to speak later today, while we also have a 7yr note auction, this follows a 2yr & 5yr auction so far this week.
FOREX: USD Index Softer, USD/JPY Eyeing Tuesday Lows, AU CPI Coming Up
Feb-26 00:15
Early G10 dealings are skewed against the USD, with yen firming in recent trade. The USD BBDXY index is down a touch, last near 1283.6. We are still above recent lows of 1281.2, but the technical set up looks poor this index.
- USD/JPY is tracking lower, the pair last near 148.70/75 (up around 0.20% in yen terms). Intra-session lows from Tuesday printed at 148.57, which could be a short term downside target. Futures volumes have pushed higher on this move, although are within recent ranges for this time of day.
- US Tsy yields are little changed in the first part of dealing, holding losses from Tuesday's session. EUR/USD has edged up to 1.0520/25
- AUD/USD is a little higher last near 0.6350. We have the Jan monthly CPI print coming up. This print doesn't include services price updates so is less useful from that standpoint (these updates come in the mid month of the quarter, so Feb).
- Copper prices, per CMX are holding above $470, following Trump's earlier headlines around possible copper tariffs. This may be aiding the AUD at the margin, but Iron ore is off recent highs.
- NZD/USD is close to 0.5730, so like the AUD, up a touch but this follows Tuesday's underperformance, amid softer US equity tones. US equity futures are firmer in the first part of Tuesday dealing, up 0.25-0.35%, led by the Nasdaq.
- Outside of the AU CPI release due in around 15mins (we also have Aust Q4 construction work done due), the data calendar is light for the remainder of the Asia Pac session.
AUSSIE BONDS: Smooth Digestion Of Apr-37 Supply With More Demand
Feb-26 00:14
The latest ACGB April 2037 auction saw solid demand, with the weighted average yield coming in 0.54bps through prevailing mid-yields, according to Yieldbroker, continuing the trend of firm pricing at recent ACGB auctions.
- The cover ratio rose significantly to 3.6688x, up from 3.2188x at the previous auction, indicating stronger investor participation.
- As highlighted in our preview, bidding at today’s auction was supported by a higher outright yield, a steeper 3/10 curve and the bond line’s inclusion in the XM futures basket.
- Global sentiment toward bonds has also improved notably since mid-November, providing a more favourable backdrop for today’s issuance.
- Early post-auction trading has seen a 1bp richening in both XM futures and the bond line.
