US TSYS: Tsys Futures Steady, Ranges Narrow

The Japanese Ministry of Finance (MoF) will today sell Y900bn of 30-Year JGBs. The MoF last sold 30-year debt on 8 October 2024. The auction drew cover of 3.3438x at an average yield of 2.152%, an average price of 99.05, a high yield of 2.157%, and a low price of 98.95, with 88.5641% of bids allotted at the high yield.

• Last month’s 30-year bond auction was well absorbed, with the low price exceeding dealer expectations. The cover ratio held steady at 3.3438x, and the auction tail narrowed.
• However, today’s auction follows this month’s weaker 10-year auction, where the low price missed expectations, the cover ratio declined, and the tail widened.
• For the current 30-year auction, the outright yield is at a cycle high, around 15bps above last month’s level. The 30-year JGB, in a 20-/30-/40-year butterfly spread, is similarly valued to last month, while the 10/30 yield curve has steepened slightly.
• Today’s auction also takes place amid heightened pressure on global long-end bonds following last week’s U.S. election results.
• Against this backdrop, it will be interesting to see whether the 30-year supply reflects the challenges seen in the 10-year auction earlier this week.
• Results are due at 0335 GMT / 1235 JT.

Asian markets are trading lower today, driven by concerns over upcoming US inflation data and its potential impact on the Fed interest rate cuts path. Key equity benchmarks across the region are all lower with the regional index hitting its lowest level since mid-September. Rising yields, a stronger USD, and trade uncertainties are weighing on investor sentiment. 

• Chinese mainland stocks are stabilizing after earlier losses tied to fears over US-China relations under the Trump administration, with his key picks for top government posts being critical of China. The CSI 300 is flat, Telecom stocks are outperforming the wider market with that index up 2.60%. Hong Kong listed equities continue to struggle with the HSI down 1%, with the Mainland Property Index -1.50% and the HS Tech Index -1.30%.
• Japanese stocks edged lower as the rally following the US election begins to lose momentum. Despite some support from positive earnings reports, after Tokyo Electron jumped 3.50% after reporting better-than-expected 2Q results, overall market sentiment is dampened by uncertainty around US economic policy. The TOPIX is 1% lower, while the Nikkei is -1.10% lower
• South Korean stocks are under pressure, with tech giants like Samsung and LG Energy leading the losses. Foreign investors have sold $202m of Korean equities this morning, with majority of that coming from tech stocks, while there has been small buying of Service & Medical stocks. Earlier the unemployment rate rose to 2.7% vs 2.6% est and up from 2.5% in September. Taiwan equities saw their largest outflow in over two months on Tuesday, the TAIEX is trading little changed today.
• Australian equities have been dragged down by losses in banking and mining stocks, tracking Wall Street's retreat after a recent rally. The ASX200 is trading 1.10% lower today. New Zealand's NZX50 is 0.85% lower.

USD/CNH sits just up from session lows in latest dealings, the pair near 7.2300 (lows rest at 7.2260). We are up around 0.20% in CNH terms so far today, unwinding part of the 1.3% loss seen in the prior 3 sessions. The much stronger than expected CNY fixing (with the widest error since Aug 5 in USD/CNY terms) has helped pull the pair away from the 7.2500 region. 

• Spot USD/CNY is also tracking lower in early dealings, last near 7.2200 This pair couldn't get much above 7.2400 yesterday. So these may be near term levels (above 7.2500 for USD/CNH), that may be difficult to breach, given the step up in push back via the fixing bias today.
• For USD/CNH we may see support around initial post US election highs near 7.2100/30, on any further pull back. The simple 200-day MA is around 7.2000, while key EMAs rest sub this figure.
• The market bias may rest with buying dips in the pair, given risks around the outlook into 2025 in terms of trade tensions with the US. The near term focus though will rest with the upcoming US CPI print.
• The local equity tone was negative in early trade but is now close to flat.