JGBS AUCTION: PREVIEW: 5-Year JGB Auction
The Japanese Ministry of Finance (MoF) will today sell Y2.3tn of 5-Year JGBs. The MoF last sold 5-year debt on 14 January 2025, with the auction drawing cover of 3.8158x at an average yield of 0.876%, an average price of 100.11, a high yield of 0.878%, a low price of 100.10, with 28.5121% of bids allotted at the high yield.
- Last month’s 5-year bond auction demonstrated mixed demand metrics. The auction price surpassed dealer expectations. However, the cover ratio declined significantly to 3.8158x from 4.4177x. Meanwhile, the auction tail was unchanged compared to last month at 0.01.
- Today’s auction also comes after this month’s 10-year bond auction reflected mixed demand signals. The low price beat expectations, according to the Bloomberg dealer poll. However, the cover ratio declined to 3.1809x from 3.3570x in the previous auction and the tail lengthened slightly to 0.03 from 0.01.
- Results are due at 0335 GMT / 1235 JST.
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AUSSIE BONDS: Subdued Session Ahead Of US CPI
ACGBs (YM -2.0 & XM -2.0) are slightly cheaper after trading in a narrow range in today's Sydney session.
- Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after yesterday’s directionless session. Focus turns to today’s CPI inflation data for December where rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December.
- Cash ACGBs are 1-2bps cheaper with the AU-US 10-year yield differential at -14bps.
- Swap rates are 2-3bps higher.
- The bills strip flat to -1 across contracts.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (101%) now, with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
- Today, the local calendar is empty.
- Expectations of strong pricing at auctions were confirmed, with the latest ACGB Dec-34 supply achieving a weighted average yield that printed 0.70bp through prevailing mids (per Yieldbroker). The cover ratio also improved, rising to 2.8875x from 2.8375x.
- AOFM Bond issuance will issue A$700mn of the 2.75% 21 November 2027 bond on Friday.
ASIA STOCKS: China & Hong Kong Equities Opening Slightly Lower
- China & Hong Kong equities are opening slightly lower in morning trade, although ranges are narrow. The Hang Seng is -0.30%, while CSI 300 is -0.40% with Tech & Healthcare sectors struggling the most.
- Chinese regulators plan to implement measures, including a swap facility and refinancing facility introduced by the PBOC, to stabilize the stock market. These tools are expected to inject approximately ¥400bi into the A-share market in 2025, according to strategists from CICC and CITIC Securities.
- Country Garden reported a record loss of ¥178.4b ($24.3b) amid China’s prolonged housing crisis, driven by impairments, declining margins, and weak sales. While its first-half 2024 loss narrowed to ¥12.8b, the developer faces mounting debt of ¥250b and ongoing challenges in its restructuring efforts, with a key wind-up petition hearing set for January 20. Shares remain suspended, having lost 97% of their value since 2018. Property Indices are underperforming the wider market this morning, with the Mainland Property Index -1.25%, while BBG China Property Developer Index is -0.90%.
CHINA PRESS: China M2 Increases In December
China’s M2 money supply reached CNY313.5 trillion in December, up 7.3% y/y, driven by the migration of government deposits and wealth management funds to resident and corporate deposits, according to Mingming, chief economist at CITIC Securities. Looking ahead, new credit and social financing are expected to increase y/y as authorities adopt a moderately easing monetary policy and guide financial institutions to increase credit supply, said Wang Qing, chief macro analyst at Orient Securities. (Source: Securities Daily)
