- MXN rebounded as Trump and Mexican PM Sheinbaum shared a positive phone call. Spill over to the rest of the FX landscape was limited. The USD consolidating after Wednesday's sharp drop. US cash Tsys trading is closed today for Thanksgiving.
- Australia and NZ data didn't shift sentiment greatly. The RBNZ is likely to slow the pace of cuts after Feb next year. The BoK surprised in South Korea with a 25bps cut.
- The US is closed for Thanksgiving. ECB’s Lane and Elderson speak. On the data front, there are preliminary Spanish/German November CPIs, November Euro Commission survey and October euro area M3/lending. We also hear from RBA Governor Bullock later.
MARKETS
US TSYS: Tsys Futures Edges Slightly Lower, Long-End Underperforming
- There is too isn't much happening in Tsys futures today, however the late move heading into the NY close overnight has somewhat continued, with longer-end contracts underperforming. TU is -00⅝ at 102-23⅞, while the TY is -03 at 110-20+, while WN is -12 at 125-27
- Cash tsys trading is closed today for Thanksgiving. Overnight the 10yr briefly traded through 4.25%, before closing the session at 4.26%. The 10yr has seen a 24bps tightening since it reached cycle highs of 4.50% on Nov 15th.
- The 2s10s inverted on Monday, before the curve steepened slightly, last 3.209, it has spent the three months trading between flat and 20bps.
- Option flows have been skewed towards downside protection, betting on a deeper sell-off in tsys, with a notable flow a 14,000 10yr February 107.50 puts bought at 12. Open interest in the strike sits at 51,702 and follows buying of the same option on Monday in 39,500 at 12 for a premium of $7.5 million with the strike targets approximately 4.75% yield.
- Fed fund futures are pricing in 15.5bps of cuts at the December meeting, 21.8bps of cumulative cuts by Jan, before a full rate cut is priced in for March.
JGBS: Slightly Richer, Focus On Extra Budget, Heavy Local Calendar Tomorrow
JGB futures are holding richer, +22 compared to settlement levels, ahead of tomorrow’s heavy data drop.
- “Japan will lean heavily on extra tax revenue in a ¥13.9 trillion additional budget to finance Prime Minister Shigeru Ishiba’s stimulus package, according to NHK.” (per BBG)
- “Japan is to issue more than 6trn Yen in JGBs to fund extra budget, sources say.” (per RTRS)
- Cash US tsys are closed today ahead of the Thanksgiving holiday.
- Cash JGBs are slightly mixed across benchmarks, with yields 2bps lower to 1bp higher. The benchmark 10-year yield is 1.2bps lower at 1.059% versus the cycle high of 1.108%.
- The swaps curve has twist-steepened, with rates 1bp lower to 4bps higher.
- OIS pricing has firmed across meetings following the BOJ's widely anticipated decision to hold rates steady at its October meeting. Since the decision, pricing has risen by 4–19bps, with September 2025 leading the gains.
- Market expectations currently indicate: a 51% probability of a 25bp hike in December; a cumulative 73% chance by January; and a full 25bp increase is not fully priced in until May 2025.
- Tomorrow, the local calendar will see Tokyo CPI, Jobless Rate, Job-To-Applicant Ratio, Retail Sales, Housing Starts and Industrial Production data alongside 2-year supply.
STIR: BOJ Dated OIS Firmer Across Meetings Since Last MPM
BOJ-dated OIS pricing has firmed across meetings following the Bank of Japan's widely anticipated decision to hold rates steady at its October meeting.
- Since the decision, pricing has risen by 4–19bps, with September 2025 leading the gains.
- For the upcoming December meeting, pricing has increased by 12bps, reflecting a 64% probability of a 25bp rate hike. This shift comes after recent remarks from BoJ Governor Ueda, who described the meeting as “live.”.
- However, Ueda reiterated that the BoJ has no predetermined path for raising its policy rate from the current 0.25%, emphasising that rate decisions will be data-dependent and assessed on a meeting-by-meeting basis.
- According to a Bloomberg survey, just over half of economists expect the BoJ's next rate hike to occur in December.
- Market expectations currently indicate: a 64% probability of a 25bp hike in December; a cumulative 74% chance by January; and a full 25bp increase is not fully priced in until May 2025.
Figure 1: BOJ-Dated OIS – Today Vs. Pre-BOJ
Source: MNI – Market News / Bloomberg
JAPAN DATA: Offshore Buying Streak Of Japan Equities Ends
Japan weekly outbound and inbound investment flows were negative across the board last week. In terms of offshore inflows into Japan assets, the 8 consecutive week of flows into local stocks ended. We had -¥446bn in net outflows. Offshore investors also sold local bonds, albeit only partially reversing the prior week's strong inflow. This continues the see-saw pattern of flows for this segment. Uncertainty around the BoJ outlook may be influencing such trends, with the past week seeing pricing for a Dec hike rise.
- In terms of Japan outbound flows. Japan investors sold offshore bonds for the second straight week. The trend here is clearer, with net outflows mostly dominating, as US firmer bond yields crimp global bond returns.
- For offshore equities, local investors continued to sell down holdings. This has also been the main theme of recent months.
Table 1: Japan Weekly Investment Flows
| Billion Yen | Week ending Nov 22 | Prior Week |
| Foreign Buying Japan Stocks | -446.0 | 123.5 |
| Foreign Buying Japan Bonds | -300.7 | 1157.6 |
| Japan Buying Foreign Bonds | -773.7 | -964.7 |
| Japan Buying Foreign Stocks | -318.1 | 169.1 |
Source: MNI - Market News/Bloomberg
AUSSIE BONDS: Richer & At Session Bests Ahead Of RBA Gov. Bullock Speech
ACGBs (YM +6.0 & XM +5.0) are richer and at Sydney session highs.
- Outside of the previously outlined private capital expenditure, there hasn't been much by way of domestic drivers to flag.
- Private GFCF should post a positive quarterly result on December 4’s Q3 national accounts. Inventory, net exports and government spending inputs are released on December 2 and 3.
- The local calendar will also see a speech from RBA Governor Bullock at the CEDA Conference aftermarket.
- Cash US tsys are closed today ahead of the Thanksgiving holiday, with no data out until next week.
- Cash ACGBs are 5-6bps richer.
- Swap rates are 5-6bps lower.
- The bills strip has twist-flattened, with pricing -1 to +8.
- RBA-dated OIS pricing is flat to 6bps richer across meetings. A 25bps rate cut is not fully priced until May.
- Tomorrow, the local calendar will see Private Sector Credit alongside AOFM’s planned sale of A$700mn of the 1.50% 21 June 2031 bond.
AUSTRALIA DATA: Capex Recovery May Have Begun Driven By Non-Mining
Private capital expenditure rose 1.1% q/q in Q3 to be up 1.0% y/y, close to consensus expectations, after falling 2.2% q/q and -0.1% y/y in Q2. The increase was driven by non-mining investment. It signals that private GFCF should post a positive quarterly result in December 4’s Q3 national accounts. Inventory, net exports and government spending inputs are released December 2 and 3.
- Private building investment rose 1.1% q/q as did machinery & equipment but compared to a year ago they were down 1.1% y/y and up 3.4% y/y respectively.
- Investment intentions for the current financial year were revised up 5.1%.
- Mining investment was weak in Q3 falling 1.9% q/q but intentions were revised moderately higher by 1.4%.
- Non-mining rose 2.3% and intentions were revised up 6.7%. Building was 3.5% q/q higher driven by large manufacturing upgrades and data centre builds. Machinery & equipment increased 1.4% q/q driven by the manufacturing, finance and health sectors.
Australia real capital expenditure y/y%
RBA: Senate Looks Likely To Pass RBA Board-Splitting Legislation
The Greens have agreed to support the government’s proposals for the recommended RBA review changes in the Senate where the administration needs their votes. The sticking point for the opposition coalition was the Treasurer choosing the replacements on the monetary policy board when the current Board is split into policy and operations. The Greens have agreed to this on the condition that Section 11 of the RBA Act allowing the Treasurer to override a policy decision is retained, which finance minister Gallagher said the government is open to.
- The other Greens amendment allows for the RBA to inform banks where to focus lending. The left wing party had previously demanded that the government force the RBA to cut rates, which would have breached its independence.
- Governor Bullock has asked for continuity on the monetary policy committee with not too many external members shifting when the current Board is split. The opposition was concerned that they would be replaced by people sympathetic with the current government.
- Today is the last chance for the government to pass the RBA bill before the Christmas break and possibly before the next election due by mid-May 2025. Dividing the RBA Board required legislation whereas introducing meeting press conferences did not and they have now been in place since the start of the year.
BONDS: NZGBS: Richer, RBNZ Suggests Slower Easing Pace After February
NZGBs closed 1-6bps richer, ending the session at their best levels. Compared to pre-RBNZ decision levels yesterday, NZGBs are mixed. The 2-year yield is up 5bps while the 10-year is down 2.5bps.
- The NZ-AU 10-year yield differential has widened slightly to +3bps, now 13bps above the early November low.
- The RBNZ’s latest projections suggest a slower pace of easing ahead, with potential pauses in the rate-cutting cycle following a third consecutive 50bps cut in February, according to Assistant Governor Karen Silk.
- “There could be pauses built in, but it is definitely a slower track after February,” Silk told Bloomberg News in an interview Thursday in Wellington. With inflation projected to pick up to 2.5% next year, monetary policy needs to remain mildly restrictive to “keep some pressure” on price-setting, she said. (per BBG)
- Swap rates closed 3-7bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed slightly softer across meetings today. Nevertheless, pricing remains 4-9bps firmer than yesterday’s pre-RBNZ decision levels. 42bps of easing is priced for February, with 97bps by November 2025.
- Tomorrow, the local calendar will see ANZ Consumer Confidence data.
RBNZ: Further Rate Cuts In Early 2025 As Head Back To “Neutral”
Deputy Governor Hawkesby plus Assistant Governor Silk and Chief Economist Conway have appeared at the Finance and Expenditure Committee hearing. Consistent with the updated OCR profile, Silk stated that the MPC is very confident that it will be able to cut rates again in early 2025 and Conway said that the aim is to move rates back to neutral. On Wednesday Governor Orr said that the RBNZ estimates neutral at 2.5-3.5%.
- Growth is expected to recover in 2025 and Conway said that the forecast +0.3% q/q for Q4 this year is consistent with what the bank heard from the over 80 businesses it spoke to.
- He also said that the RBNZ will need to look at the upward revisions to the past two years of GDP data and what that means for its assessment of the output gap. Excess capacity has been one reason why it is confident that underlying inflation will return to the 1-3% band.
- Wage and price setting behaviour has begun to adjust to the lower inflation environment but there is a risk that it doesn’t shift enough resulting in more persistent domestically-driven inflation, which would mean less monetary easing.
- Conway noted that the RBNZ’s forecasts have been “reasonably accurate”. He also said that the latest projections do not contain possible US tariffs as it is still very unclear what they will look like.
NEW ZEALAND: Continued Contraction In Filled Jobs Signals Further Job Shedding
October filled jobs fell 0.1% m/m to be down 1.5% y/y after -0.1% and -1.0%. This was the seventh consecutive monthly decline but the 3-month average pace of contraction is moderating. While it is only one month of Q4, it is pointing to another decline in employment after Q3 fell 0.5% q/q. Weak growth is not only driving less job growth but also redundancies. Further monetary easing is likely in early 2025.
- The RBNZ forecast the unemployment rate to peak at 5.2% in Q1 2025 in its November projections with employment down 0.5% y/y. While the unemployment rate was revised down over the forecast horizon, employment growth is now expected to be weaker than assumed in August.
- Goods-producing industries and services were both lower at -0.2% m/m and -0.1% respectively, while primary rose 1.2% m/m.
- The government’s plan to reduce spending is reflected in filled jobs for public administration & safety which are down 7.2% y/y in October.
- Construction (-5.3% y/y), admin services (-6.2% y/y) and accommodation & food services (-3.5% y/y) were other weak sectors, while health care rose 3.7% y/y. In addition, all regions saw a drop on a year ago.
- Youth unemployment can be a leading indicator of labour market trends, and the annual contraction in filled jobs was sharpest in the 15-19 yrs age group followed by 25-29 yrs. Over 35yrs saw an increase.
NZ filled jobs y/y% vs SEEK job ads
NEW ZEALAND: Business Survey Signals Stabilisation & Lower Price Expectations
The November ANZ business survey was generally positive on both growth and inflation. Not only did the activity outlook rise a further 2 points to 48.0, the highest in over 10 years, but activity compared to a year ago continued its gradual improvement. Also inflation expectations fell further. With cost, pricing and wage expectations all moderating, the RBNZ should remain confident that “core inflation is converging” on the target mid-point. This and its focus on growth should mean further easing at the start of 2025.
- Rate cuts and expectations of more seem to be driving a stabilisation in business intentions and an improvement in the outlook supported by close to record easy credit conditions. Business confidence moderated slightly to 64.9, but still close to October’s 65.7, highest since March 2014. The outlook is pointing to a pickup in Q4 GDP growth.
NZ GDP y/y% vs ANZ business activity outlook
- The services sector drove a slight improvement in employment intentions to 14.7 from 14.2, but they are still soft. Wage expectations fell to 75.5 from 77.0 with the retail sector elevated at 84. They are expected to rise a modest 2.6% over the coming year, which has been stable.
- Q3 headline CPI inflation moderated to 2.2% y/y and seems to have helped drive a 0.3pp moderation in inflation expectations to 2.5%, the lowest since June 2021.
- Pricing intentions fell 2 points to 42.2, the first monthly decline since June, but still above the Q3 average. The average increase fell 0.1pp to 1.6% though. Costs eased to 62.9, the lowest in almost four years but still elevated with expectations at 2.0% over the next three months (down from 2.3%).
NZ ANZ business survey price/cost measures
Source: MNI - Market News/Refinitiv
FOREX: USD Consolidates After Sharp Wed Drop, MXN Up As Trump & Sheinbaum Speak
After a sharp pull back on Wednesday, USD sentiment has stabilized somewhat in the first part of Thursday trade. The BBDXY was last near 1280, little changed for the session. Yen is the weakest performer in the G10 space at the margins, off a little over 0.30%.
- FX sentiment has been impacted by various headlines. MXN rallied after incoming US President Trump stated on Truth Social he had a successful phone call with Mexican President Sheinbaum. The border issue and controlling drug flows were discussed. USD/MXN fell to lows of 20.3824, but sits back near 20.42 in latest dealings (up nearly 0.90% for the session.
- The NYT noted there were differing interpretations around migration details from the call. Still, the market will see anything that reduces tariff chances as a positive.
- USD/CAD is down slightly, last near 1.4020.
- USD/JPY sits up near 151.60. After being up 2.4% in the first sessions for the week, today has seen a modest pullback. Earlier lows in the pair were at 150.93. US equity futures are also a touch higher. US Tsy futures are down slightly, although there is no cash trading given the US Thanksgiving holiday. USD/CHF is up around 0.20% to 0.8835.
- AUD/USD is down slightly, last near 0.6485/90. Q3 capex trends were mixed, but didn't impact sentiment. China equities are down, amid potentially further US curbs on China chips, although the BBG story stated the curbs weren't as bad as feared.
- NZD/USD is also quite steady, last near 0.5890. Jobs filled data was lower, but the ANZ survey measure saw an improved outlook.
- Looking ahead, the US is closed for Thanksgiving. ECB’s Lane and Elderson speak. On the data front, there are preliminary Spanish/German November CPIs, November Euro Commission survey and October euro area M3/lending.
ASIA STOCKS: Equities Mixed, As US Curbs On China Weigh On Stocks
Asian stocks traded in a narrow range as investors weighed potential new US curbs on chip sales to China and awaited possible stimulus measures from Beijing. Mainland China and Hong Kong equities declined after a recent rally, while Japanese stocks rose on gains in chip-related shares and a weaker yen. Korean shares fluctuated following a surprise interest rate cut by the central bank. Meanwhile, US equities slipped overnight as an acceleration in the Fed's preferred inflation measure supported a cautious stance on rate cuts, the NASDAQ led losses overnight with Dell and HP plunging nearly 12% after reporting disappointing sales
- Japanese stocks fluctuated as tech-heavy Nikkei trading down 0.3% at one point before rallying on the new of US curbs on China, Tokyo Electron was up as much as 10% at one point, while Kokusai jumped over 20%. The wider TOPIX is 0.90% higher while the Nikkei trades 0.80% higher.
- Australian equities are on track for another day of gains, with healthcare & Financials trading higher, the ASX is currently up 0.65%
- South Korea's KOSPI opened lower this morning before rallying following a surprise BOK rate cut, however we now trades unchanged for the day. Economists overwhelming expected the bank to hold, however the BOK cut citing slowing growth forecasts and external risks such as potential US trade tariffs, while many also expected the bank to protect the currency, bank officials stated most of the recent weakness in the KRW was largely due to USD strength. Foreign investors have so far this morning continued selling local stocks with a net outflow of $100m, $75m of that from tech stocks
- Taiwan's TAIEX has erased earlier gains and now trades 0.4% lower. There have been some heavy outflows in the region recently with $2b leaving the market in the past two sessions, taking yearly outflows to -$18b.
EQUITIES: Chinese Equities Fall Following US Curbs On Chip Suppliers
Chinese equities declined sharply due to concerns over potential additional US curbs on chip supplies to China, undermining recent optimism about the resilience of mainland stocks under trade tensions. While speculation about economic stimulus in December had fueled a surge in the CSI 300 on Wednesday, the possibility of actual restrictions or tariffs is weighing heavily on market sentiment. Investors fear that without new stimulus from Beijing, the market could face further pressure. Additionally, Beijing’s potential stimulus measures remain a key focal point, with urgency growing due to both domestic economic challenges and external threats like US trade policies under a second Trump presidency.
- The CSI 300 is trading 0.80% lower, consumer discretionary is the worst performing sector, trading 2% lower, led by a 5.5% drop for SAIC Motors, followed by a 3% drop in BYD. SAIC has joined HYD in calling for a 10% price cut from suppliers. Hong Kong listed equities are underperforming mainland equities, with the HSI last down 1.30%, Mainland Property Index trades 1.70% lower, while the HSTech now trades 1.30% lower.
- Over 161 listed companies in China have secured loans exceeding 37.39b yuan ($5.16b) for share buybacks or stake increases, with maturities typically spanning 12 to 36 months. Notable recipients include Muyuan Foods, Wens Foodstuff, and COSCO Shipping Energy, each obtaining over 1 billion yuan. This initiative aims to stabilize the capital market, boost vitality, and lower corporate financing costs, per China Securities Journal.
- The Biden administration is preparing to impose new restrictions on semiconductor equipment and AI memory chip sales to China, potentially targeting Huawei suppliers and over 100 Chinese firms involved in chip manufacturing equipment. While the curbs aim to tighten US control over China’s tech ambitions, they exempt allies like Japan and the Netherlands, whose firms could gain a competitive edge over affected American chipmakers. This news pushed Japanese semiconductor names up with the likes of Tokyo Electron up as much as 10%, while Kokusai jumped over 20%.
ASIA STOCKS: Taiwan Sees Large Outflows
Another large outflow from Taiwan on Wednesday, with the region now seeing over $2b in outflows over the past two sessions as Trump announces Tariffs.
- South Korea: Recorded outflows of -$236m yesterday, with a 5-day total of -$534m. YTD flows remain positive at +$4.98b. The 5-day average is -$107m, slightly better than the 20-day average of -$134m, but worse than the 100-day average of -$121m.
- Taiwan: Experienced outflows of -$1.28b yesterday, with a 5-day total of -$2.45b. YTD flows are deeply negative at -$18.09b. The 5-day average is -$490m, worse than the 20-day average of -$366m and the 100-day average of -$222m.
- India: Posted inflows of +$453m yesterday, with a 5-day total of +$1.65b. YTD flows remain negative at -$824m. The 5-day average is +$330m, much better than the 20-day average of -$120m and the 100-day average of -$10m.
- Indonesia: Recorded outflows of -$37m yesterday, with a 5-day total of -$194m. YTD flows remain positive at +$1.64b. The 5-day average is -$39m, slightly better than the 20-day average of -$50m, but worse than the 100-day average of +$19m.
- Thailand: Posted outflows of -$3m yesterday, bringing the 5-day total to -$32m. YTD flows are negative at -$3.76b. The 5-day average is -$6m, better than the 20-day average of -$17m, and close to the 100-day average of -$5m.
- Malaysia: Experienced outflows of -$93m yesterday, with a 5-day total of -$252m. YTD flows are slightly negative at -$21m. The 5-day average is -$50m, worse than the 20-day average of -$26m, and the 100-day average of +$1m.
- Philippines: Posted outflows of -$9m yesterday, with a 5-day total of -$34m. YTD flows remain negative at -$264m. The 5-day average is -$7m, better than the 20-day average of -$17m, but worse than the 100-day average of +$3m.
Table 1: EM Asia Equity Flows
OIL: Crude Down Slightly On Light Trading With Focus On OPEC Meeting
Oil prices are moderately lower today after being little changed on Wednesday as trading is light going into the Thanksgiving holiday. WTI is down 0.2% to $68.56/bbl, close to the intraday low, after a high of $68.86 early in the session. Brent is 0.2% lower at $72.68/bbl, also close to the trough. With a number of factors currently influencing markets, oil prices have been range trading and have found little support from the softer US dollar. The USD index is little changed today.
- The focus for oil markets is now firmly on the weekend’s OPEC meeting. It has already delayed its planned reduction in output cuts twice and is expected to do so again given the forecast market surplus and strong non-OPEC output in 2025. The group is likely to put a timeframe on another delay rather than leaving it open ended, a scenario that would support prices.
- The impact of the Trump administration on the US’ and Iran’s oil supply is also highly uncertain. The soft demand outlook for China remains a concern.
- The US is closed for Thanksgiving. ECB’s Lane and Elderson speak. On the data front, there are preliminary Spanish/German November CPIs, November Euro Commission survey and October euro area M3/lending.
GOLD: Little Changed But Still ~3.5% Below Monday’s High
Gold is slightly weaker in today’s Asia-Pac session, after closing little changed at $2636.02 on Wednesday, ahead of the US Thanksgiving Holiday. Nevertheless, the yellow metal remains around 3% below Monday’s high.
- Yesterday’s US data deluge was mixed but ultimately quite close to consensus. Still, it offered a reminder that core PCE inflation remains on track to overshoot median FOMC projections for Q4, while super core PCE inflation has stabilised at rates still uncomfortably above the 2% target.
- Fed Funds implied rates were little changed yesterday. Cumulative cuts from 4.58% effective: 16bp Dec, 22bp Jan, 35bp Mar and 52bp June.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- According to MNI’s technicals team, Monday’s move lower is - for now - considered corrective, despite it being a very sharp pullback. Resistance to watch is $2,721.4, Monday’s high, while key support to monitor is $2,536.9, the Nov 14 low.
- Silver underperformed yesterday, around 1.5% lower. As a result, the gold-silver ratio has risen to its highest level since Sept 12. The corrective cycle in silver that started on Oct 23 remains in play, with focus on $28.446, a Fibonacci retracement.
SOUTH KOREA: BOK Rate Cut, A Major Policy Shift?
- Following on from the surprise cut in rates by the BOK this morning, the Central Bank lowered their GDP forecast for 2024 from 2.5% to 2.3% and their CPI forecast from 2.1% to 1.9%.
- At the Press Conference Governor Rhee advised that two members opposed the cut and that 3 OF 6 MEMBERS open to further cuts.
- In recent months, the BOK and the Government appeared at odds with various ministers calling for cuts.
- Following the meeting the Finance Minister applauded the BOK publicly.
- In terms of the currency Governor Rhee played down concerns as to the currency, in what appears to be a significant policy shift.
- He said that he believed the BOK and the government have enough tools to stabilize the FX markets pointing to sufficient reserves and recent discussions with the National Pension Service about a swap line.
- The Won has continued to weaken throughout the day and during the Governor’s press conference was -0.30% weaker on the day.
- During a press conference at G20 finance ministers conference in Washington in October BOK Governor Rhee said, ‘exchange rates have emerged as a major factor again in deciding on policy rates.’
- The curve steepened with the 3-year down 7bps and the 10-year flat on the day.
- The KTB 5-year continued to outperform today with yields progressing lower, now down 8bps on the day at 2.72%.
KRW: USD/KRW Holding Sub 1400, BOK Vows To Manage Volatility
Spot USD/KRW is holding in the 1395/96, similar to levels post the initial move higher after the surprise BoK 25bps cut. Dips sub 1391 have been supported, while the topside has been capped just above 1396.
- BoK Governor Rhee stated the FX volatility was discussed during today's meeting. Rhee noted that the central bank will work with the government to manage such risks. He also stated that the central bank is discussing Raising the swap amount with the National Pension Service, which was already reported. He did add though that the swap is likely to increase substantially.
- The central bank is focused on relative won performance and that the US Fed outlook is more likely to shift won sentiment than the BOK. This fits with US-SK yield differentials being more reflective of US moves than SK ones, a trait similar to other EM Asia economies.
- This differential has lined up with \spot USD/KRW trends this past year, see the chart below. Spot USD/KRW is inverted on the chart against the SK-US 2yr government bond yield differential.
- Spreads suggests USD/KRW dips should be supported, although we may to see spreads widen beyond -150bps against South Korea to drive the pair meaningfully above 1400, at least based of this relationship.
- The bias for the BoK looks to be easier policy settings, although the timing is uncertain given the split board outlook for the next 3 months.
Fig 1: USD/KRW Spot (inverted) Versus SK-US 2yr Govt Bond Yield Differential
CHINA: Chinese Corporates Foreign Company Debt the lowest in a Decade.
- Chinese companies’ foreign currency outstanding debt has fallen to the lowest in over a decade according to data from the Central Bank (as per BBG).
- As the Chinese currency faces potential negative policies from the Trump administration Companies are better placed to weather currency volatility this time.
- The reason for the reduction may ultimately have nothing to do with White House policies.
- In recent years Chinese largest foreign bond issuers, Property Developers, have been shut off from foreign markets due to the property market collapse.
- A result of the property crash has been interest rate cuts which in turn has cheapened local funding for companies, thereby reducing their reliance on issuing foreign currency bonds.
- The lower FX debt burden may also provide some relief to CNY also as companies typically have to sell CNY to buy foreign currency when repaying maturing securities.
- A second order effect of this situation may be a more supportive return environment for investors from the Asia High Yield market.
- Historically China property issuers represented over 50% of total issuance in High Yield benchmarks and with their influence in decline, the demand for other sectors or issuers from other countries naturally increases.
CHINA: Country Wrap: Property Slump May Extend Into 2025.
- Chinese Corporates Foreign Company Debt the lowest in a Decade (source: MNI – Market News).
- Central Bank Withdraws Liquidity for Second Day (source: MNI – Market News).
- China’s Property Slump May Extend Into 2025. (source: Fitch Ratings)
- Equity markets under pressure again today with CSI 300 -0.79%, Hang Seng -1.32%, Shanghai -0.30%, Shenzhen -0.19%.
- CNY: Yuan Reference Rate at 7.1894 Per USD; Estimate 7.2501
- Bonds: China 10-year Government bond 2.05%.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 28/11/2024 | 0800/0900 | *** |  ES | HICP (p) |
| 28/11/2024 | 0800/0900 | ** |  SE | Economic Tendency Indicator |
| 28/11/2024 | 0900/1000 | ** |  EU | M3 |
| 28/11/2024 | 0900/1000 | ** |  IT | ISTAT Business Confidence |
| 28/11/2024 | 0900/1000 | ** |  IT | ISTAT Consumer Confidence |
| 28/11/2024 | 0900/1000 | ** |  IT | PPI |
| 28/11/2024 | 0900/1000 | *** |  DE | North Rhine Westphalia CPI |
| 28/11/2024 | 0900/1000 | *** |  DE | Bavaria CPI |
| 28/11/2024 | 1000/1100 | ** |  EU | EZ Economic Sentiment Indicator |
| 28/11/2024 | 1000/1100 | * |  EU | Consumer Confidence, Industrial Sentiment |
| 28/11/2024 | 1300/1400 | *** |  DE | HICP (p) |
| 28/11/2024 | 1330/0830 | * |  CA | Current account |
| 28/11/2024 | 1330/0830 | * |  CA | Payroll employment |
| 28/11/2024 | 1700/1800 |  EU | ECB's Lane speech at the 25th anniversary of Euro 50 Group at Banque de France | |
| 29/11/2024 | 2330/0830 | ** |  JP | Tokyo CPI |
| 29/11/2024 | 2330/0830 | * |  JP | Labor Force Survey |
| 29/11/2024 | 2350/0850 | * |  JP | Retail Sales (p) |
| 29/11/2024 | 2350/0850 | ** |  JP | Industrial Production |
| 29/11/2024 | 0700/0800 | ** |  DE | Retail Sales |
| 29/11/2024 | 0700/0800 | ** |  DE | Import/Export Prices |
| 29/11/2024 | 0700/0800 | ** |  SE | Retail Sales |
| 29/11/2024 | 0700/0800 | *** |  SE | GDP |
| 29/11/2024 | 0745/0845 | *** |  FR | HICP (p) |
| 29/11/2024 | 0745/0845 | ** |  FR | Consumer Spending |
| 29/11/2024 | 0745/0845 | *** |  FR | GDP (f) |
| 29/11/2024 | 0745/0845 | ** |  FR | PPI |
| 29/11/2024 | 0800/0900 | ** |  CH | KOF Economic Barometer |
| 29/11/2024 | 0800/0900 | *** |  CH | GDP |
| 29/11/2024 | 0855/0955 | ** |  DE | Unemployment |
| 29/11/2024 | 0900/1000 | ** |  EU | ECB Consumer Expectations Survey |
| 29/11/2024 | 0930/0930 | ** |  GB | BOE M4 |
| 29/11/2024 | 0930/0930 | ** |  GB | BOE Lending to Individuals |
| 29/11/2024 | 1000/1100 | *** |  EU | HICP (p) |
| 29/11/2024 | 1000/1100 | *** |  IT | HICP (p) |
| 29/11/2024 | 1030/1030 |  GB | Financial Policy Summary and Record and Financial Stability Report | |
| 29/11/2024 | 1130/1230 |  EU | ECB's de Guindos speaking at the "Encuentro de Economia" in Barcelona | |
| 29/11/2024 | 1330/0830 | *** |  CA | GDP - Canadian Economic Accounts |
| 29/11/2024 | 1330/0830 | *** |  CA | Gross Domestic Product by Industry |
| 29/11/2024 | 1330/0830 | *** |  CA | CA GDP by Industry and GDP Canadian Economic Accounts Combined |
| 29/11/2024 | 1330/0830 | ** |  US | WASDE Weekly Import/Export |
| 29/11/2024 | 1330/0830 | *** |  CA | Gross Domestic Product by Industry |