- It has been a very subdued trading session across all markets today, with China, Taiwan & South Korea out for public holidays. Later today we have US Retail Sales, BBG consensus has retail sales dropping 0.2% m/m in August, following a 1% rise in July.
- US Tsys futures are little changed today, while the USD is a touch higher, but overall ranges are fairly limited. JGB futures are stronger, currently mid-range, trading at +16 compared to settlement levels following yesterday’s public holiday.
- Oil prices have continued to rise during APAC trading today after rallying around 2% on Monday.
MARKETS
US TSYS: Tsys Futures Steady Ahead Of Retail Sales
- It has been a very subdued trading session across all markets today, with China, Taiwan & South Korea out for public holidays. Later today we have US Retail Sales, BBG consensus has retail sales dropping 0.2% m/m in August, following a 1% rise in July.
- Tsys futures are little changed today TUZ4 is -00⅜ at 104-14⅛, while TYZ4 is -01 at 115-17
- Earlier, there was a Block 2s10s steepener, and an block sell of FV.
- Cash tsys yields are flat to 1bps higher, the curve has steepened slightly. The 2yr is +0.2bps at 3.553%, while the 10yr is +0.4bps at 3.621%.
- Projected rate cuts have firmed 2-3bps throughout the session with the moves coming just post NY close and have continued throughout the Asian session vs. Monday levels (*) : Sep'24 cumulative -43.3bp (-40.6bp), Nov'24 cumulative -80.5bp (-79.1bp), Dec'24 -121.0bp (-120.0bp).
- Today we have Retail Sales, Industrial Production and a 20y bond auction
JGBS: Cash Bond Yields Mostly Lower, US Retail Sales Later Today
JGB futures are stronger, currently mid-range, trading at +16 compared to settlement levels following yesterday’s public holiday.
- (MNI) The BoJ board will consider leaving its policy interest unchanged at 0.25% when it hands down its decision on Friday, despite the belief among policymakers that the economy and prices are largely moving in line with projections.
- The upside risk to prices driven by high import costs – a key concern for policymakers in July – has fallen due to the yen's appreciation, allowing the Bank more time to watch price moves without the need to raise the policy rate for now.
- Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session. Today's US calendar sees Retail Sales, Industrial Production and a 20y bond auction.
- The cash JGB curve continues to hold a twist-flattening, pivoting at the 2-year, with yields 1.8bps higher to 3.1bps lower.
- Swap rates are flat to 1bp lower out to 30-year and 2bps higher beyond.
- The local data calendar has been light today, with the July tertiary industry index due later.
- Tomorrow, the local calendar will see Trade Balance and Core Machine Orders data alongside 1-year supply and BoJ Rinban Operations covering 1-25-year JGBs.
AUSSIE BONDS: Treading Water Ahead Of US Retail Sales Later Today
ACGBs (YM -2.2 & XM flat) are slightly weaker after a data-light session.
- Cash US tsys are flat to 1bp cheaper, with a slight steepening bias, in today’s Asia-Pac session after yesterday’s modest rally. Today's US calendar sees Retail Sales, Industrial Production and a 20y bond auction.
- Cash ACGBs are flat to 2bps cheaper, with the AU-US 10-year yield differential at +19bps.
- Swap rates are flat to 2bps higher, with the 3s10s curve flatter.
- The bill strip has bear-steepened, with pricing flat to -3 across contracts.
- RBA-dated OIS pricing is slightly mixed. A cumulative 20bps of easing is priced by year-end.
- Tomorrow's local calendar will see Westpac Leading Index and a speech from Brad Jones, RBA Assistant Governor (Financial System). The calendar’s highlight will be August’s Employment Report on Thursday.
- Tomorrow, the AOFM plans to auction A$1.0bn of the 3.75% 21 April 2037 bond, followed by a sale of A$500mn of the 3.25% 21 April 2029 bond on Friday.
NZGBS: Closed Slightly Cheaper After A Subdued Session
NZGBs closed on a weak note with yields 3bps higher. Dealings were subdued on a data light session ahead of tomorrow’s FOMC policy decision.
- Cash US tsys are slightly cheaper in today’s Asia-Pac session after yields fell 2-5bps yesterday. Today's US calendar sees Retail Sales, Industrial Production and a 20y bond auction.
- NZGBs held by international investors increased to 60% from a month earlier in August, according to the RBNZ.
- In its Fortnightly Economic Update, the NZ Treasury said “With migration levels normalising, weakness is emerging across more services industries. House sales continue to drop and, while interest rates are falling, average mortgage rates are still elevated limiting retail spending and house price growth.” (per BBG)
- Swap rates closed 2bps higher.
- RBNZ-dated OIS pricing closed flat to 3bps firmer across meetings. However, year-end expectations, currently at 4.40%, remain just 6bps above the cyclical low of 4.34% set in late December last year.
- Tomorrow, the local calendar will see Current Account Balance and Westpac Consumer Confidence data, ahead of Q2 GDP on Thursday.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 1.50% May-31 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.
NEW ZEALAND STIR: RBNZ Dated OIS End-24 Expectations Approach Cyclical Low
RBNZ-dated OIS pricing is flat to 4bps firmer across meetings today.
- However, year-end OCR expectations, currently at 4.47%, remain just 13bps above the cyclical low of 4.34% set in late December last year.
Figure 1: RBNZ OCR & End-24 Expectations (%)
Source: MNI – Market News / Bloomberg
FOREX: Tight Ranges Prevail Ahead Of Key Event Risks
G10 FX trends have been reasonably steady in the first part of Tuesday trade. There is a modest bias towards a slightly firmer USD, but gains are very modest for the most part. The BBDXY USD index was last 1222.9, slightly up on end NY levels on Monday.
- USD/JPY had an early spike higher, the pair getting to 141.23 but quickly dipped back below the figure level. Lows were at 140.32 and we last tracked around 140.70/75, slightly weaker in yen terms for the session.
- News flow as the market awaits key event risks later in the week, with the Fed the main focus point, but we also have the BoJ meeting outcome.
- US equity futures sit down a touch, while regional equity markets are mixed (Japan down, but Hong Kong higher). China markets remain closed today.
- In the US Tsys space we have seen yields move a touch higher, but gains are less than 1bps at this stage, with outright levels close to recent lows. US data later on, particularly the retail sales print, may help firm expectations around the Fed outcome, although central banks tend to focus on trends rather than one data point.
- AUD and NZD sit down a touch. AUD/USD last near 0.6740/45, while NZD/USD is off around 0.20% to 0.6190, but there has been little movement in these pairs outside of some earlier softness.
- Looking ahead, the ECB’s Buch, McCaul and Elderson appear. Later the Fed’s Logan gives opening remarks but is unlikely to speak on policy this close to an FOMC meeting. US August retail sales, IP and September NY Fed services print as well as August Canadian CPI.
ASIA STOCKS: Asian Equities Mixed, Yen Weighs On Japanese Stocks
- Markets are trading mixed today as investors focus on upcoming monetary policy decisions from the Fed and BoJ. In Japan, the Nikkei 225 fell 2%, driven by a sell-off in semiconductor and tech stocks following the decline in the Nasdaq, while the stronger yen continues to weigh on export-oriented companies like automakers and electronics firms.
- In Hong Kong, the debut of Midea Group shares saw a strong surge, reflecting revived hopes for the city’s stock market. Property stocks have seen a bit of a bounce, although we still trade near all time lows (Mainland Property Index +1.25%, HS Property Index +2.50%) with investors hoping lower US rates will spur a rebound in the struggling sector, the HS Tech Index trades +1.25%, HS Mainland Banks Index is +1.90% while the HSI is +1.40% and the China Enterprise Index is also +1.40%
- Australia Equities are slightly higher today, Real Estate names are the top performing. The ASX200 is 0.30% higher.
- China, South Korea & Taiwan all have public Holidays today with equity markets closed.
ASIA STOCKS: Equity Flows Mixed, Multiple Public Holidays
- South Korea: Market closed for Public Holiday. The past 5 sessions totaling -$2.17b, while YTD stands at +$12.57b. The 5-day average is -$434m, below both the 20-day average of -$273m and the 100-day average of -$12m.
- Taiwan: Saw $217m of outflows yesterday, with the past 5 sessions netting +$223m, while YTD is -$14.85b. The 5-day average is +$45m, above the 20-day average of -$333m and the 100-day average of -$128m.
- India: Saw inflows of $949m Thursday, with the past 5 sessions now totaling +$2.01b, while YTD is +$21.23b. The 5-day average is +$445m, above the 20-day average of +$346m and the 100-day average of +$79m.
- Indonesia: Market closed for Public Holiday. The past 5 sessions netting +$1.33b, while YTD flows are +$3.37b. The 5-day average is +$265m, above both the 20-day average of +$152m and the 100-day average of +$25m.
- Thailand: Saw inflows of $11m yesterday, with the past 5 sessions now totaling +$184m, while YTD flows are -$2.70b. The 5-day average is +$37m, below the 20-day average of +$46m and the 100-day average of -$8m.
- Malaysia: Market closed for Public Holiday. The past 5 sessions netting +$50m, while YTD flows are +$930m. The 5-day average is +$10m, below the 20-day average of +$45m but above the 100-day average of +$16m.
- Philippines: Saw inflows of $3m yesterday, with the past 5 sessions totaling +$32m, while YTD flows are -$251m. The 5-day average is +$6m, below the 20-day average of +$12m and slightly above the 100-day average of -$3m.
Table 1: EM Asia Equity Flows
OIL: Crude Continues To Rally Ahead Of Fed Decision, Demand Concerns Persist
Oil prices have continued to rise during APAC trading today after rallying around 2% on Monday. WTI is up 0.7% to $70.56/bbl after a high of $70.65 and Brent is 0.4% higher at $73.08 after rising to $73.12. The expected Fed rate cut on Wednesday with the possibility of as much as 50bp has driven oil prices higher as well as the continued dispute in Libya reducing output. The USD index is slightly higher.
- Technical and speculative selling exacerbated this month’s move lower in crude but ahead of the Fed, prices have been supported by short covering. Concerns over global demand for oil, especially from China remain close by.
- Iraq has said that the closure of a pipeline because of a dispute over payment in the country’s northern oil fields continues but has made it easier to achieve its OPEC quota. The Iraqi PM said that the budget allows it to pay foreign firms $8 per barrel produced but contracts with Kurdistan’s government allow for $26.
- With around 12% of oil production in the Gulf of Mexico still shut in following Hurricane Francine, US inventory data will likely be a focus. Industry figures are released today and the official EIA ones on Wednesday.
- Later the Fed’s Logan gives opening remarks but is unlikely to speak on policy this close to an FOMC meeting. US August retail sales, IP and September NY Fed services print as well as August Canadian CPI. The ECB’s Buch, McCaul and Elderson appear.
GOLD: Fresh All-Time High Ahead Of The Fed’s Policy Decision
Gold is 0.2% lower in today’s Asia-Pac session, after closing 0.2% higher at $2582.45 yesterday. Earlier in the session bullion hit a fresh all-time high of $2,586.10/oz, aided by further dollar weakness and the dovish rate outlook for the US Federal Reserve.
- US tsys finished richer yesterday as the market speculated that the US Fed could cut by more than 25bps on Wednesday. Lower rates are typically positive for gold, which doesn’t pay interest.
- BofA strategists led by Michael Hartnett wrote on Friday that “gold at all-time highs is the best hedge against 2025 inflation reacceleration.” (per BBG)
- According to MNI’s technicals team, a bullish structure in gold remains intact, with the focus on $2,600.0.
INDONESIA: BI Unlikely In Hurry To Ease As Trade Data Signal Solid Demand
The August trade surplus was higher than expected at $2.9bn up from $0.5bn driven by an upside surprise to export growth. Imports were still strong rising 9.5% y/y although down from 11.1%, signalling robust domestic demand, while export growth improved to 7.1% y/y from 6.6%, the strongest since January 2023. Both sides of the ledger point to robust demand and add to the arguments as to why Bank Indonesia is likely to stay on hold at its Wednesday meeting (see MNI BI Preview).
Indonesia trade balance US$mn vs 3-mth average
Source: MNI - Market News/Refinitiv
- Export growth has been recovering since it troughed in Q3 last year and returned to positive territory in April 2024. Indonesia has one of the highest exposures to China in the region, with 26% of 2023 exports going there, which has weighed on its overall export growth. Non-oil shipments to China remain soft but have improved since Q1 2024 with August down 0.8% y/y.
- With around 10% of exports going to the US, Indonesia has seen less benefit from stronger growth there than other countries in the region such as Korea. In August, Indonesian non-oil shipments to the US rose 22.5% y/y.
- Annual export growth in August was predominantly driven by precious metals & jewellery, mineral fuels and electrical machinery. Agriculture, forestry & fishing increased sharply by 39.6% y/y, while manufacturing rose 8.7% and mining 2.8% with copper shipments up strongly on the month.
- Imports were boosted by metal ores and capital goods (+11.9% y/y). Oil & gas imports were down due to lower prices. Consumer goods imports were weak falling 7.4% y/y in August.
Indonesia exports vs imports y/y%
Source: MNI - Market News/Refinitiv
INDONESIA CENTRAL BANK: MNI BI Preview - September 2024: First Watch The Fed
- Bank Indonesia (BI) meets on September 18 and will announce its decision hours before the Fed. With meetings every month, BI has the flexibility to watch and wait and is unlikely to feel the pressure to cut rates on the day the Fed is widely expected to begin easing, especially given uncertainties. 6/35 on Bloomberg expect a 25bp cut.
- BI should be happy with the progress of rupiah strengthening but FX stability is likely to remain its focus. USDIDR is now lower than it was when BI hiked in April and October and the IDR NEER higher than in April. Its reliance on money market deepening tools to support the currency is likely to continue unwinding ahead of rate cuts.
- In August, Governor Warjiyo said that BI’s focus in Q3 is on FX stability and that it needs more certainty on the outlook before it eases, which he reiterated is likely to be in Q4. The swearing in of Indonesia's new President Prabowo and US elections which take place after BI's October 16 meeting may push the first cut out to November.
- See full preview here.
MALAYSIA: Bond Wrap
- Global funds are snapping up Southeast Asian assets as the prospect of interest-rate cuts and attractive valuations holds out the promise of supersized returns (source: Bloomberg).
- No significant data releases until Wednesday’s trade data.
- Strong day for risk assets with equity markets up and bond yields lower.
3yr 3.33% (+0.5bp) 5yr 3.476% (-2bp) 10yr 3.676% (-2bp) 30yr 4.046%
INDONESIA: Bond Wrap
- Indonesia trade data today showed that the rebound in exports continued, supported by very strong imports pointing to the strength of the underlying economy.
- This likely provides the BI with time to pause this week ahead of the FED’s decision.
- Bonds markets were firm today with yields in most maturities lower, recognizing the decreased probability of a rate cut.
2yr 6.572% 5yr 6.452% (-1bp) 10yr 6.57% (-1.5bp) 30yr 6.844%
ASIA FX: MYR, IDR Outperform, Thailand Expects Growth Boost From Cash Handout
South East currencies have mostly traded with a stronger bias against the USD, although part of this reflects catch up for a number of markets who were closed yesterday for onshore holidays. This fits with the broader USD picture where USD indices are close to recent lows ahead of the upcoming Fed decision.
- USD/MYR has fallen to fresh lows of 4.2745, but sits slightly higher in latest dealings (last close to 4.2810). This is 0.50% stronger in MYR terms. Early 2023 lows at 4.2450 could be the next downside focus point.
- USD/THB is firmer, but found selling interest above 33.35, we were last close to 33.25, so not too far off recent lows. The Thailand government has approved 145.6bn baht in first payments for its cash hand out scheme. The finance ministry expects this to boost GDP growth by 0.35% (RTRS). Government borrowing is also rising by 8% for the upcoming Financial year (per BBG).
- USD/IDR is lower, also playing catch up with softer USD trends. The earlier low at 15310, was close to recent lows, but we sit higher now around 15340. Trade data was firmer than expected and add to the arguments as to why Bank Indonesia is likely to stay on hold at its Wednesday meeting.
- USD/SGD is near session lows, close to 1.2950. We had earlier export data, which was slightly below expectations but electronic exports surged in y/y terms. For spot USD/SGD this is close to a decade low in the pair.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 17/09/2024 | - |  | US | FOMC Meeting / S.E.P. | |
| 17/09/2024 | 0900/1100 | *** |  | DE | ZEW Current Conditions Index |
| 17/09/2024 | 0900/1100 | *** | | DE | ZEW Current Expectations Index |
| 17/09/2024 | 0900/1000 | ** |  | UK | Gilt Outright Auction Result |
| 17/09/2024 | 1215/0815 | ** |  | CA | CMHC Housing Starts |
| 17/09/2024 | 1230/0830 | *** | | CA | CPI |
| 17/09/2024 | 1230/0830 | *** | | US | Retail Sales |
| 17/09/2024 | 1255/0855 | ** | | US | Redbook Retail Sales Index |
| 17/09/2024 | 1300/1500 |  | EU | ECB's Elderson in supervisory effectiveness panel | |
| 17/09/2024 | 1315/0915 | *** | | US | Industrial Production |
| 17/09/2024 | 1400/1000 | * | | US | Business Inventories |
| 17/09/2024 | 1400/1000 | ** | | US | NAHB Home Builder Index |
| 17/09/2024 | 1530/1130 | * | | US | US Treasury Auction Result for Cash Management Bill |
| 17/09/2024 | 1700/1300 | ** | | US | US Treasury Auction Result for 20 Year Bond |
| 17/09/2024 | 2200/1800 | | CA | BOC Sr Deputy Rogers fireside chat on women in finance. |
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