Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
- Broader risk sentiment remains jittery despite news from late yesterday that UBS had agreed to a takeover of Credit Suisse. The bounce in EU equity futures didn’t last, while most regional equity markets in Asia Pac are in the red, with weakness in financials a particularly focus point. Holders of risky (AT1) Credit Suisse bonds reportedly face a $17bn wipe out. This has weighed heavily on similar bonds in the Asia region.
- This is likely to be a key focus for European markets in early trade today. In the US, bond volatility remains very elevated. The 2yr yield back sub 3.70%, after being as high as 4.02% in earlier trade. This saw the USD weaken, but only against the yen, with higher beta and Asia FX weighed by weaker equity sentiment and risk aversion.
- Fresh support in terms of boosting access to USD liquidity via existing swap lines between major central banks didn’t have a lasting positive impact on sentiment at the start of the session.
- The focus is also likely to be on US banks later today, particularly in the small and medium sized sector. A group of these banks asked the FDIC to insure all deposits in the sector for the next 2years.
US TSYS: Curve Steepens In Volatile Asian Session
TYM3 deals at 115-22, -0-04, marginally off the top of the observed 0-29+ range on elevated volume of ~273k.
- Cash tsys sit 2bps cheaper to 2bps richer across the major benchmarks, the curve has twist steepened pivoting on 5s.
- Tsys opened dealing cheaper as local participants digested news of the UBS takeover over of Credit Suisse as well as the coordinated Central Bank action to enhance the provision of US Dollar Liquidity. The 2-year Yield rose as much as 17bps.
- A fall in regional bank stocks saw tsys firm off session lows. The likely wipeout of holders of Credit Suisse’s AT1 debt rattled risk sentiment.
- Fed data OIS sit level changed from closing levels on Friday, there were 23bps of hikes seen in March and May with a terminal rate of ~4.8%. Through to December 2023 there are ~100bps of cuts priced in.
- The fallout from the UBS/Credit Suisse deal as well as the US focus on regional banks will dominate today. PPI data from Germany and Eurozone trade balance headline an otherwise thin docket on Monday.
AUSSIE BONDS: Closes At Bests As U.S. Tsys Unwind Early Weakness
ACGBs close near session highs (YM +19.0 & XM +15.5) as U.S. Tsys unwind the weaker open to Asia-Pac trade following the weekend’s banking news. A decline in regional bank stocks, after news that Credit Suisse AT1 bondholders were set to be wiped out, appeared to strengthen the recovery in U.S. Tsys.
- Cash ACGBs richened 14-16bp with the 3/10 curve 2bp steeper and the AU-US 10-year yield differential -1bp at -17bp.
- Swaps curve bull steepened 2bp with rates 15-17bp lower.
- Bills strengthened 20-23bp across the strip with late whites/early reds leading.
- Ahead of the release of the RBA Minutes tomorrow, RBA dated OIS softened 20-30bp for meetings beyond May. Today’s move reinforced the message from last week that the peak in the cash rate this cycle had already been seen.
- By the close, the market had priced 37bp of easing by year-end, after receiving a boost from comments by RBA Kent regarding the elongated lags for policy this cycle as well as an acknowledgement that the banking crisis, among other issues, would be considered at the April meeting.
- The highlight of the global calendar nonetheless will be the FOMC meeting (Tue/Wed). BBG consensus expects a 25bp hike, although some analysts expect no move.
NZGBS: Stronger, Tracking U.S. Tsys’ Reaction To Weekend’s News
NZGBs opened stronger, weakened with U.S. Tsys’ initial reaction to the weekend’s banking news, before closing at or near session bests as U.S. Tsys reversed course in Asia-Pac trade. NZGBs richen 17-19bp on the day with the 2/10 curve 2bp steeper and the NZ/US 10-year yield differential -5bp.
- Swaps bull steepen 2bp with rates 17-19bp lower.
- RBNZ dated OIS closed 8-13bp softer for meetings beyond April with terminal OCR expectations at 5.21% (+46bp of additional tightening across meetings out to July). April meeting pricing settled at 22bp of tightening.
- The local calendar is scheduled to release February's Trade Balance data tomorrow. After last week’s worse-than-expected Q4 current account deficit print and resultant bond rating guidance from S&P, the release will be closely watched.
- RBNZ Chief Economist Conway is scheduled to give a speech: “The path back to low inflation in NZ” at a capital markets forum on Thursday.
- Elsewhere, the RBA Minutes, slated for release tomorrow, will provide further details on the dovish shift at the March meeting.
- The global calendar’s highlight this week however is the FOMC meeting (Tue/Wed). BBG consensus expects a 25bp hike, although some analysts expect no move.
EQUITIES: Financials Under Pressure On Fallout From UBS Takeover Of Credit Suisse
Regional equities started the day on a more positive footing, but this has given way to a more cautious tone as the session progressed. China is the only major regional market to be sitting in positive territory at this stage. Developments outside the region remain key, following the UBS takeover of Credit Suisse. EU futures were up +1.4% in early trade, but now sit comfortably back in the red, while US futures aren't too far away from flat, also giving up earlier gains.
- Financial stocks have been a particular focus point as holders of risky (AT1) Credit Suisse bonds reportedly face a $17bn wipeout. Similar bonds for regional bank names today have traded sharply lower with the region. This has weighed on Asia Pac financials, with a Bloomberg large & mid cap index for the sector off by nearly 2%.
- The HSI is off by over 2.5%, with the underlying tech sun-index down by ~3%. Weakness has also been evident in financials, with HSBC down sharply.
- China shares are modestly positive, being viewed as insulted somewhat from the global turmoil, while the RRR cut from late on Friday is also a positive at the margins. The CSI 300 is up 0.10-0.15% at this stage.
- In Japan, the Topix is off by around ~1.40%, with the underlying bank index off 1.90%. The Kospi (-0.64%) and Taiex (-0.29%) have fared slightly better.
- The ASX200 is down near 1.40%, with financial names again under pressure, with lower commodity prices also likely weighing on material stocks.
- In SEA, we are seeing modest outperformance from Thai equities.
GOLD: Consolidates After Posting Fresh YTD Highs On Friday
After surging to fresh YTD highs on Friday, gold has consolidated in the first part of trade this week. After closing last week at $1989.25, we sit comfortably lower now, last around $1974. This is around 0.75% off Friday highs, but note that gold rose last week just under 6.5%. We have seen some consolidation in terms of broader USD trends, but today's moves may represent a consolidation post strong gains last week in terms of the precious metal.
- Dips today have been supported sub the $1970 level. Below that is early Feb highs just under $1960, which could be a support point on the downside. On the topside is highs from Friday and then round figure resistance at $2000.
- Gold ETF holdings fell on the final day of trading last week, but the broader macro backdrop looks supportive of holdings given risk aversion remains elevated today.
OIL: Weaker, But Brent Avoids Fresh Test Of $72/bbl For Now
Brent crude got close to $73.75/bbl in early dealings but is now back to $72.40/bbl, which is below closing levels from the end of last week. We are off a further 0.8% so far today, after losing 11.85% last week. We are yet to test sub $72/bbl yet, with support around this region tested on 3 occasions through the tail end of last week. WTI is off by a similar amount so far today and currently sits around the $66.20/bbl level.
- Oil has followed broader risk appetite today, with limited positive follow through to the announcement that UBS will take over Credit Suisse. Regional equities are mostly weaker and EU futures are back int he red (after being as high as +1.4% earlier).
- The demand outlook amid turmoil in the global banking sector remains a focus point.
- Goldman Sachs analysts no longer see Brent reaching $100/bbl this year (with a revised $94/bbl forecast for the 12 months ahead).
- Brent prompt spreads remain weak, while the closure of a France refinery over the weekend (due to protests) also expected to weigh on near term demand.
FOREX: USD Pares Losses As Risk Appetite Wanes
The greenback was pressured in early dealing however weakness in regional equities and a retreat from early highs in EU/US equity futures has seen the USD pare its losses. The likely wipeout of holders of Credit Suisse’s AT1 debt has rattled risk sentiment.
- Kiwi is the weakest performer in the G-10 space at the margins, NZD/USD printed an early high of $0.6306 before falling ~1% as risk sentiment waned. The next downside target is the 20-Day EMA ($0.6217).
- AUD is also pressured. AUD/USD prints at $0.6680/85 ~0.2% softer, downside support comes in at $0.6590 low from March 15. RBA's Kent spoke this morning and noted that its likely to take longer than usual to see the full effect of higher rates due to the high proportion of borrowers on fixed rate loans.
- Yen is little changed, USD/JPY has dealt in a ~100 pip range. The pair firmed before paring gains as risk sentiment soured through the Asian session and US yields pulled back. The pair last prints at ¥131.75/85.
- EUR and GBP have pared early gains and both side unchanged from Friday's closing levels.
- Cross asset wise; US equity futures are unchanged, e-minis have been up as much as ~0.7%. Hang Seng is down ~2.5%. 10 Year US Treasury Yields are ~1bp lower, however they were up as much as 8bps.
- The fallout from the UBS/Credit Suisse deal as well as the US focus on regional banks will dominate today. PPI data from Germany and Eurozone trade balance headline an otherwise thin docket on Monday.
ASIA FX: Parts Of SEA Still Outperforming The NEA Bloc
The USD has either made gains today against individual currencies or pairs are away from lows from a USD/Asia standpoint. Risk appetite has waned as the session progressed. There has against been some outperformance in terms of South East Asia currencies, relative to the North East Asia Bloc. Less exposure to global banking issues and US yields unable to gain upside traction today, have been likely positives for the SEA bloc. Still to come today is Taiwan export orders, while tomorrow delivers South Korean first 20-days trade data for South Korea and Feb PPI.
- USD/CNH was supported sub 6.8800 in early trade. The pair is now back above 6.9000. We are around 0.25% weaker for the session so far in CNH terms. As expected, the 1yr and 5yr MLF rates were held steady. Onshore equities have outperformed but this has not driven CNH outperformance. Some lingering weakness, from a currency standpoint, may be evident from Friday's RRR cut.
- 1 month USD/KRW couldn't sustain early levels sub 1300. The pair is now back to 1309/10, as equity market weakness has weighed on broader sentiment. Offshore investors have sold 188mn of local shares today. Spot USD/TWD hasn't seen much downside either, last around 30.57/58, the 200-day MA sits nearby at 30.60.
- USD/SGD has enjoyed slightly more downside, the pair back under 1.3420. The SGD NEER (per Goldman Sachs estimates) is little changed today, the measure remains a touch below the top of the recent range. We now sit ~0.8% below the top of the band. Feb CPI highlights the week, CPI crosses on Thursday. Outside of global banking issues, the print is a key input into next month's MAS meeting, with both the headline and core numbers expected to print above the MAS inflation targets.
- THB remained an outperformer, USD/THB got to 34.00, but now sits slightly higher, last around 34.15. Thai equities are holding relatively flat, which is an outperformance theme. USD/PHP spot is also a touch lower, last around 54.65.
- INR and IDR are seeing less outperformance, albeit at the margins. USD/IDR spot is a little higher, last near 15380, +0.20% for the session so far. USD/INR is relatively steady near 82.50.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 20/03/2023 | 0700/0800 | ** |  | DE | PPI |
| 20/03/2023 | 0730/0730 |  | UK | DMO to Confirm Gilts on Offer at 4/5 April Auctions | |
| 20/03/2023 | 1000/1100 | * |  | EU | Trade Balance |
| 20/03/2023 | - | | UK | DMO Quarterly Consultation with GEMMs / Investors | |
| 20/03/2023 | 1400/1500 | | EU | ECB Lagarde Intro at ECON Hearing | |
| 20/03/2023 | 1530/1130 | * |  | US | US Treasury Auction Result for 13 Week Bill |
| 20/03/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 20/03/2023 | 1600/1700 | | EU | ECB Lagarde Intro as ESRB Chair at ECON |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.