MNI EUROPEAN MARKETS ANALYSIS: Oil Holds Gains, Coming Up OPEC, Fedspeak & EIA Data

US TSYS: Treasury Futures Steady, Ranges Tight Ahead of Fed Speakers Later

• Jun'24 10Y futures are back to opening levels, trading at 109-24, ranges have remained very tight throughout the day, with highs of 109-27 and lows of 109-23, while volumes have remained on the low side. Earlier there was a block trade looked like a seller of the 2Y contract in 2,500 size.
• Looking at technical levels: Initial support lays at 109-24+ (March 18 low and bear trigger) while below here the 109-14+ (Nov 28 low /Mar 2 low) a move back below here would open a move to 109-12+ (1.764 proj of Dec 27 - Jan 19 - Feb 1 price swing). While to the upside resistance holds at 110-29+/31+ (50-day EMA / Mar 27 high), above here 111-10+ (Mar 13 high).
• Cash Treasury Curve have bear-flattened today with yields flat to 1bp higher, the 2Y yield +0.6bp at 4.695%, 10Y +0.8bps to 4.357%, while the 2y10y unchanged at -34.212
• Been little in the way of headlines, other than "YELLEN SAYS CHINA WON'T OVERWHELM US INDUSTRY AGAIN: WSJ"
• Looking Ahead: ADP Jobs, S&P Global US Services/Composite PMIs (final), ISM Services and multiple Fed Speakers through the session.

JGBS: Futures Holding Slightly Weaker But Well Above Session Lows

In Tokyo Afternoon dealings, JGB futures are holding weaker, -2 compared to the settlement levels. Nevertheless, JBM4 currently sits some 20 points above the session lows.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Jibun Bank and S&P Global PMIs.
• Following yesterday's twist-steepening, US tsys are offering limited direction for the local market. Cash US tsys have seen minimal movement during today's Asia-Pac session.
• This morning’s BoJ Rinban operations saw negative spreads and slightly lower offer cover ratios for the shorter-dated buckets (<1-year: 1.53x, 1-3-year: 2.10x and 3-5-year: 2.06x). The 10-25-year bucket, however, showed mixed results. The bucket saw a lower offer cover ratio but a positive spread.
• The cash JGB curve has twist-steepened, with yields 1bp lower to 1bp higher. The benchmark 10-year yield is 0.2bp higher at 0.751% versus the YTD high of 0.801%.
• Swaps are little changed, with swap spreads mixed.
• Tomorrow, the local calendar will see Weekly International Investment Flow data alongside 30-year supply.

AUSSIE BONDS: Weaker & Near Cheaps, Narrow Ranges, May-41 Bond Supply Absorbed

With the absence of domestic data, ACGBs (YM -6.0 & XM -7.5) are holding cheaper and near session cheaps after dealing in relatively narrow ranges in today’s Sydney session.

• Following yesterday's twist-steepening, US tsys are offering limited direction for the local market. Cash US tsys have seen minimal movement during today's Asia-Pac session.
• Today’s May-41 bond was smoothly absorbed, with the cover ratio surging to 3.300x, a notable increase from the 2.100x recorded at the August 2023 auction.
• Today's auction bid seems to have found support from a higher outright yield, a steeper yield curve and a favourable outlook on the RBA policy stance, following the removal of the explicit tightening bias in March.
• Cash ACGBs are 5-7bps cheaper, with the AU-US 10-year yield differential 3bps higher at -22bps.
• Swap rates are 4-6bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -7.
• RBA-dated OIS pricing is flat to 5bps firmer across meetings. A cumulative 33bps of easing is priced by year-end.
• Tomorrow, the local calendar sees Judo Bank Composite & Services PMIs and Building Approvals data alongside a Speech by Brad Jones, Assistant Governor (Financial System) at COSBOA’s National Small Business Summit.

NZGBS: Closed Little Changed, NZ-AU 10Y Narrowed Significantly

NZGBs closed little changed. Yields closed flat to 1bp lower and 5-7bps stronger than morning levels across benchmarks.

• The NZGB 10-year also outperformed its ACGB counterpart, with the NZ-AU 10-year differential narrowing by 9bps to 45bps.
• A successful issue of the new May-35 bond via syndication likely supported the move away from session cheaps.
• The NZ Treasury issued NZ$4.5bn of the line, just shy of the transaction cap of NZ$5bn, at 6bps over the 15 May 2034 nominal green bond (yield to maturity of 4.7775%). Initial price guidance was 4-8bps over the May-34 bond.
• Swap rates closed 3-6bps higher, with the 2s10s curve steeper and implied swap spreads significantly wider.
• RBNZ dated OIS pricing closed flat to 1bp softer across meetings. A cumulative 70bps of easing is priced by year-end.
• Tomorrow, the local calendar sees CoreLogic House Prices, Building Permits and ANZ Commodity Price data. The Government will also present its 8-month Financial Statements.
• Given today’s May-35 bond issuance, the weekly bond auction scheduled for tomorrow has been cancelled.

FOREX: FX Range Trading, Fed Chair Powell Speaks Later

Currencies have generally been in narrow ranges during APAC trading today ahead of Fed Chairman Powell speaking later and Friday’s US payrolls. The BBDXY USD index is off its high early in the session to be down slightly. The rest of the G10 is little changed. USDCNY fixing was close to yesterday’s at 7.0949.

• AUDUSD approached 65c earlier but has rebounded following the slightly better-than expected China Caixin services PMI. It doesn’t seem to be deterred by weaker Asian equities and the pair is currently up 0.1% to 0.6521, close to the intraday high.
• NZDUSD is also close to today’s high at around 0.5974. AUDNZD is steady around 1.0917.
• JPYUSD is unchanged around 151.57. The Jibun Bank services PMI for March was revised down but still higher than February.
• EURUSD is up 0.1% to 1.0778 ahead of preliminary March CPI data released later today. GBPUSD is little changed at 1.2581.
• Asian currencies are also in narrow ranges with USDCNH down slightly to 7.252 and USDIDR up 0.1% to 15918 after Tuesday’s BI intervention. The Korean won is one of the biggest movers with USDKRW down 0.3% to 1348.25.
• Later Fed Chair Powell speaks on the economic outlook and Bostic, Bowman, Goolsbee, Barr and Kugler also appear. On the data front, there are US March services ISM/PMI and ADP employment, and euro area March preliminary CPI (see MNI Euro Area CPI Preview) and February unemployment.

EQUITIES: Asian Equities Head Lower As Higher Yields Hurt Risk Sentiment

Regional Asian equities are lower today, as fewer projected US rate cuts are forecast by the markets. US yields continue to push higher, with the 10Y making fresh YTD highs after US job openings data suggested labor demand is stabilizing at an elevated level. Semiconductor names have edged lower on the back of Intel Corp reporting data on its foundry business, showing a decline in revenue and widening losses, while EV names are lower after Tesla missed delivery expectations by the biggest margin ever.

• In Japan equities opened lower across the board but have managed to erase some of those losses, the tech heavy Nikkei 225 is down 0.63%, while the Topix fares better now trading unchanged. Earlier Jibun Bank Japan PMI Composite was 51.7 down from the prior month of 52.3, while services PMI was 54.1 down from 54.9. Elsewhere the Yen is relatively stable at 151.57, but with a widening yield differential there could be further weakness to come, with traders eyeing the 152.00 level.
• South Korean equities gapped lower on the open, following moves from the US and regional peers, higher US yields alongside poor results from Intel and Tesla have also weighed on the market. SK reported foreign reserves rebounding last month after two straight months of declines, with investment gains offsetting the decrease in conversion value of non-dollar assets. The Kospi has broken below its recent lower range of 2,730 to trade at 2710. There could be further weakness to come and a retest 2,690 could be in play. The Kospi is down 1.40% in early trading.
• Taiwanese equities have opened trading lower while there have been reports of an earthquake that have rocked the entire island and knocked down some buildings, Japan has issued tsunami warnings. Elsewhere the USD/TWD has hit new YTD highs and now trades back at Nov 15th levels. Semiconductor names are the worst performing sector, with the Taiex down 0.45%.
• Australian equities are largely following other markets in the region lower on the back of higher yields and poor results from the US. Energy and Utility names are the only sectors in the green today, with Financials and Heath care names the worst performing. the ASX200 is down 1.22%.
• Elsewhere in SEA, New Zealand equities are lower, down about 1% as higher yields weigh on the market, while NZ Feb filled jobs rose 0.3% m/m, Singapore is also down about 1%, while Malaysia and Philippines trades mostly unchanged in early trading.

EQUITIES: Hong Kong & China Equities Mostly Lower, CSI300 Fails to Break 200-day EMA

Hong Kong and China equities are mostly lower today, following moves from US stocks as investors grow worried about interest rates. There has been little else in the way of headlines, while Caixin China PMI data showed an increase from the month prior with both composite and services PMI coming in at 52.7, up from 52.5 the month prior.

• In Hong Kong, equities are mostly lower with the HSTech Index down 1.20%, the Mainland Property Index slightly higher, while the HSI is down 0.52%. In China, markets are slightly lower with the CSI300 down 0.20%, while the smaller-cap CSI1000 is down 0.70% and the ChiNext down 0.90%.
• China Northbound flows were -1.61billion yuan on Monday, with the 5-day average at 0.75billion, while the 20-day average sits at 1.28 billion yuan.
• The CSI300 was unable to break the 200-EMA of 3595 on Tuesday, with the Index having broken below here back in July 2021 and hasn't been able to break and hold above since.
• In the property space, Country Garden experienced an 83% decline in home sales for March compared to the previous year, adding to its financial struggles. The company missed its annual results deadline due to insufficient information and faces a wind-up petition after defaulting on dollar debt. China's property sector overall is showing little sign of improvement, with March home sales continuing to decline steeply. Concerns about developers' financial stability, including Country Garden and China Evergrande Group, are causing homebuyers to avoid purchasing properties from these companies. Country Garden is seeking support from regulators for its residential projects to alleviate the impact of the sales downturn on its cash flow.
• Joe Biden and Xi Jinping held a phone call where they discussed various topics, including AI, military cooperation, climate change, and drug trafficking. Biden raised concerns about China's support for Russia's defense industry and emphasized the importance of rule of law in the South China Sea. Xi expressed concerns about US restrictions on China's tech sector and warned against any US involvement in supporting Taiwanese independence. Both leaders agreed to strengthen communication on international and regional issues. Additionally, it should be noted upcoming visits by the US Treasury Secretary Janet Yellen and Secretary of State Antony Blinken.
• Looking ahead, it's a light calendar for the remainder of the week, while Hong Kong has Retail Sales later today, and S&P Global PMI on Thursday

OIL: Crude Holds Onto Gains, OPEC Meets Later Today

Oil prices have held onto their gains from Monday/Tuesday and have edged slightly higher during APAC trading in anticipation of today’s OPEC meeting and news that US inventories fell last week . WTI is up moderately to $85.18/bbl after rising to an intraday high of $85.64 early in the session. Brent is 0.1% higher at $89.02/bbl as it edges closer to $90. The USD index is slightly lower.

• Today OPEC+ will meet online but no change is expected as delegates said current quotas were appropriate and not all members have been committed to output cuts. A decision on whether to extend the cuts into Q3 is likely to be made in early June.
• Bloomberg reported that there was an inventory drawdown of 2.29mn barrels of crude in the US last week, according to people familiar with the API data. Gasoline stocks fell 1.46mn barrels and distillate -2.55mn. Later today the official EIA data is released.
• The US announced that it would not be purchasing crude for the strategic petroleum reserve in Louisiana due to be delivered in August/September, as it has to consider value for tax payers. WTI is up around 18% this year.
• Later Fed Chair Powell speaks on the economic outlook and Bostic, Bowman, Goolsbee, Barr and Kugler also appear. On the data front, there are US March services ISM/PMI and ADP employment, and euro area March preliminary CPI (see MNI Euro Area CPI Preview) and February unemployment.

GOLD: Record-Breaking Run Continues

Gold is 0.2% higher after making a fresh all-time high of $2288.40 in today’s Asia-Pac session.

• Yesterday’s 1.3% gain came as Fed speakers supported short-end rates. Fed Mester ('24 voter but retiring in June) won't rule out a rate cut in June, while Fed Daly said three rate cuts in 2024 is still a "reasonable baseline".
• The rise in geopolitical tensions in the Middle East was also supportive.
• Further out the curve, the push higher in US Treasury yields continued on high volume as Europe returned from an extended Easter holiday weekend. Stronger US employment data (JOLTS Openings) and higher oil prices weighed.
• According to MNI’s technicals team, the trend condition in gold remains bullish. Key trend support has been defined at $2146.2, the Mar 18 low.
• (AFR) Investors can expect gold to keep resetting its record high as a wave of political elections this year and the prospect of central banks cutting interest rates fuel demand for the safe haven asset. (See link)

PHILIPPINES: Philippines Sov Curve Little Changed, Spread Diff Continues To Tighten

The Philippines USD sovereign debt curve is little changed on Wednesday. There has been very little in the way of markets headlines out of Philippines this week.

• The PHILIP curve is mostly unchanged on Wednesday out-performing the move higher by US treasuries yields, the 2Y yield is unchanged at 4.84%, 5Y yield is unchanged at 5.00%, the 10Y yield is 2bp higher at 5.10%, while 5yr CDS is 2bp higher at 66.5bps.
• The PHILIP to UST spread continues to tighten with the front-end nearing YTD tights, the 2y is 13.5bps (-1bps), the 5yr is 65.5bps (-1bp), while the 10yr is 74.5bps (-0.5bps)
• Cross-asset moves: USD/PHP is 0.06% higher at 56.355, the PSEi is 0.91% lower, while US Tsys curves are largely unchanged for the day with yields flat to 0.5bp higher.
• The Philippines achieved milestone with a net trade surplus of USD2.45 billion in travel last year, signaling a positive outlook for its tourism industry. This surplus, along with surpassing the USD100 billion export mark for goods and services, reflects the country's resilience and potential as a major economic player, bolstered by strong performance in travel services and ongoing efforts to strengthen tourism promotion.
• Looking Ahead: CPI is due out on Friday

INDONESIA: Indon Sov Curve Steeper,IDR Hits 4 Year Highs Amid Heavy Bond Selling

Indonesian USD sovereign debt curve is slightly steeper today, with yields flat to 2bps higher, yields pushed higher throughout the Tuesday session finishing the day 5-8bps higher, tracking moves made by US Treasuries. There has been little in the way of local market headlines, with the weakening IDR the major focus as the IDR slides to a four-year low amid USD strength and heavy bond outflows.

• The INDON sov curve is slightly steeper on Wednesday, the 2Y yield is unchanged at 4.97%, 5Y yield is 0.5bp higher at 4.945%, the 10Y yield is 1.5bps higher at 5.095%, while the 5-year CDS is 1bps higher at 75.5bps
• The INDON to UST spread widen in the front-end on Tuesday ad Fed speakers support front-end US yields, while the long-end INDON yields out-performed the moves by US treasuries, the 2yr is 28bps (+2bps), 5yr is 60bps (-1bp), while the 10yr is 74.5bps (-0.5bps).
• In cross-asset moves, the USD/IDR is 0.14% higher, the JCI is 0.65% lower, Palm Oil is 2.00% higher, while US Tsys curves are largely unchanged for the day with yields flat to 0.5bp higher.
• Bank Indonesia intervened in the currency market to stabilize the rupiah after it reached a four-year low due to a global dollar rebound and significant bond outflows. Heavy bond outflows, amounting to around $1.7 billion in the first quarter, contributed to the rupiah's decline. Additionally, concerns about above-expected March inflation and President-elect Prabowo Subianto's expansive spending plans, particularly a $29-billion school meal program, have raised worries about Indonesia's budget deficit and credit ratings
• (Bloomberg) -- BI May Surprise With Rate Hike After Rupiah Selloff: Barclays (Sell link)
• Looking ahead: Light calendar ahead with just Foreign Reserves ahead for the week.