CNH: USD/CNY Fixing Still Steady

• CHINA SETS YUAN CENTRAL PARITY AT 7.1703 TUE VS 7.1886

In Tokyo morning trade, JGB futures opened stronger, hitting +19 compared to settlement levels, in line with stronger US tsy futures (TYH5), which hit 109-02, +0-17 compared to closing levels. However, the move has been pared to +10 for JYH5 on Trump tariff news.

• News just out that Trump suggests tariffs on Canada and Mexico could take effect on February 1 has caused a sharp reversal.
• Cash US tsys were sharply richer early in today’s Asia-Pac session, with yields 6-9bps lower after yesterday’s holiday. However, that has been pared on the Trump news to 4-6bps richer.
• Today’s local calendar is empty apart from 40-year supply.
• Cash JGBs are 1-2bps richer across benchmarks. The benchmark 10-year yield is 1.5bps lower at 1.185% versus the cycle high of 1.262%.
• Swap rates are slightly lower. Swap spreads are wider.

• Tsys futures have reversed earlier gains, as we now trade back at opening levels following comments from Trump about 25% tariffs on Canada & Mexico. TY last trades +07 at 108-25 after earlier hitting a high of 109-02.
• Volumes in futures have surged with TY seeing over 300% the 5-day average volumes
• Cash tsys are trading 4bps to 6bps lower across the curve, with the belly outperforming, the 7yr is leading the way. 2yr was last -4bps at 4.242%, while the 10yr is -5.7bps at 4.57%. The 2s10s is -1.5bps at 32.368.

• President Trump may enact 25% tariffs on Mexico and Canada at the beginning of February, he says during remarks in the Oval Office, per bbg.