FOREX: USDJPY Continues to Outperform, Extends Bounce to 1.8%

MNI's Political Risk team has published its Week Ahead article, looking at the major political risk events scheduled for the coming seven days.

Monday 10 February:

• China-US: Following US President Donald Trump’s imposition of 10% tariffs on almost all Chinese products entering the US, Beijing has responded with its own measures as of 10 February. A 15% levy on imports of US coal and LNG, and a 10% tariff on US oil, agricultural machinery and large-engine cars have come into force. With both the US and China having now imposed some form of trade levy on the other, focus will be on whether there is an escalation into an all-out trade war or if this now sets up Washington and Beijing for negotiations.

MNIPOLITICALRISK-WeekAhead10-16Feb.pdf

• Date $MM Issuer (Priced *, Launch #)
  • 02/10 $Benchmark Eli Lilly 3Y +50a, 5Y +65a, 7Y +75a, 10Y +85a, 30Y +105a, 40Y +115a
  • 02/10 $Benchmark Textron 10Y +125a
  • 02/10 $700M Snap Inc 8NC3 7%a
• For comparison: Eli Lilly issued $5B over 5 tranches last August 8: $750M 3Y +35, $1B 5Y +50, $1.25B 10Y +70, $1.25B 30Y +88, $750M 40Y +100

J.P.Morgan note that “yields are unchanged to lower in ’25 and in the middle of the ranges they have held since the November election.”

• They go on to suggest that “given the good news on term premium, the coming weeks could open the debate on the asymmetric nature of the Fed’s reaction function. Thus, we look for cheap ways to position for higher yields within the current ranges.”
• They think “the 20-year sector looks rich along the curve”, recommending 20s/30s flatteners as a “low-beta bearish trade within the current range, with a relative value overlay.”