MNI EUROPEAN MARKETS ANALYSIS: T-Notes Fail To Hold Onto Gains, Kiwi Flies Amid M&A Chatter​

BOND SUMMARY: Ebb & Flow

T-Notes (citing the M1 contract) started the Asia-Pac session by partially retracing their Friday downswing, but failed to cling onto those early gains. The contract topped out at 132-00+ and pulled back into negative territory. It last trades -0-01+ at 131-23+, hovering just above session/Friday's low of 131-23. Cash Tsy curve bear steepened, with yields last seen 0.6-1.7bp higher. Eurodollar futures sit up to 1.0 tick lower through the reds. The main focus overnight fell on China's monthly economic activity data, which were a mixed bag (though closely watched industrial output & retail sales topped expectations), distorted by a large base effect & impact of the LNY holidays. In the U.S., an interview with Tsy Sec Yellen grabbed attention, as she downplayed the inflation risk and that there's no decision on whether to pursue a wealth tax yet.

• JGB futures were in demand from the off, smoothly surging past Friday highs in early dealing. The contract edged away from its best levels thereafter and last sits at 151.06, 7 ticks higher on the day. Cash JGB yields are lower, with belly outperforming at the margin. Japan's core machine orders recorded the first monthly drop in four months, but the decline was shallower than expected.
• Cash ACGB curve steepened at the re-open, but yields moved off steeps later in the session and last sit -0.5bp to +7.8bp. Aussie bond futures crept higher before paring some gains, YMM1 last trades unch. & XMM1 -8.6 ticks. Bills trade 1-3 ticks lower through the reds. Little to write home re: RBA Gov Lowe's latest address. Elsewhere, the Reserve Bank offered to buy A$2.0bn of ACGBs with maturities of Nov '24 to May '28, excluding ACGB Sep '26, as part of its bond-buying scheme.

FOREX: Antipodean Decoupling

Antipodeans currencies were the big movers at the start to the week, landing at the opposite ends of the G10 scoreboard. The kiwi took flight amid M&A chatter surrounding the planned sale of Tilt Renewables' Australian & NZ sales businesses to Powering Australian Renewables & Mercury NZ, with BBG trader sources flagging demand for NZD/USD from leveraged funds in reaction to the news. AUD went offered against its Antipodean cousin and AUD/NZD tumbled past last Friday's low, despite the recent emergence of a "golden cross" pattern on the intraday chart. RBA Gov Lowe delivered a fairly uninspiring speech, largely sticking to his familiar script.

• USD/CNH crept higher after the release of China's Feb round of economic activity indicators, but the broader market reaction was relatively limited. Industrial output and retail sales rose faster than forecast, but fixed assets and property investment missed expectations, while the unemployment rate was higher than projected. The implications of the data were obscured by the impact of the LNY holidays & a sizeable base effect.
• The DXY moved roughly in tandem with U.S. Tsy yields and managed to recoup its initial slide.
• JPY went offered, which allowed USD/JPY to have a look above Friday's peak, as it topped out just shy of Mar 9 cycle high. The yen's safe haven peer CHF held firm.
• U.S. Empire M'fing, Swedish CPI, Canadian housing starts & m'fing sales as well as ECB speak from Mario Centeno take focus from here.

FOREX OPTIONS: Expiries for Mar15 NY cut 1000ET (Source DTCC)

• USD/JPY: Y108.95-109.00($515mln-USD puts), Y110.00($550mln)
• GBP/USD: $1.3950(Gbp311mln)
• AUD/USD: $0.7650-65(A$751mln), $0.7700-10(A$500mln), $0.7720-35(A$713mln), $0.7780-90(A$655mln), $0.7820-30(A$501mln)
• USD/CNY: Cny6.41($500mln), Cny6.47($1.35bln-USD puts), Cny6.48($823mln), Cny6.50($596mln)

ASIA FX: Mixed As USD Rises

The greenback gained as yields held their move higher, this kept most Asia EM FX on the back foot.

• CNH: Offshore yuan has weakened since the data dump. Industrial production and retail sales both rose above estimates, but the unemployment rate rose while fixed investment was below estimates.
• SGD: Singapore dollar slightly weaker, moving in a fairly narrow range. Bonds continue to sell off which is keeping SGD under pressure.
• TWD: Taiwan dollar heads into the close weaker, gradually eroding strength throughout the session. Markets look ahead to the CBC rate announcement later this week.
• KRW: The won is the worst performer in Asia, the finance ministry said it would take steps to stabilize markets if volatility was to rapidly rise, but this gave the won only a brief reprieve.
• INR: Rupee has strengthened after weakening on Friday. Markets are digesting stronger than expected CPI figures after market on Friday which could bring rate hikes sooner than expected.
• MYR: Ringgit is stronger, there were reports that Malaysia is to get additional vaccine doses today, while Saudi Arabia has pledged to increase palm oil imports.
• IDR: Rupiah is weaker, the decline was moderated by strong export data, exports rose 8.56% in February, above estimates. The trade surplus widened less than expected though as imports jumped.
• PHP: Peso is weaker, data showed overseas remittances fell 1.7% Y/Y
• THB: Baht is stronger, the PM said Thailand was to begin the vaccine rollout on March 16.

ASIA RATES: Yields Rise

Yields broadly higher as EM Asia takes its lead from the US where yields hold their recent moves higher.

• INDONESIA: Yields rise and curve steepens, Indonesia's parliament will consider potential changes to laws that could give the government more authority over the central bank, with markets nervous over possible over extension of debt monetization.
• INDIA: Yields higher in India, markets are digesting stronger than expected CPI figures after market on Friday which could bring rate hikes sooner than expected. Markets await the results of operation switch later in the session, while trade balance data is also on the docket.
• CHINA: The PBOC refrained from large OMO injections again, matching maturities for a sixth straight day. The bank also matched maturities at the latest MLF operation. This saw money market rates jump, which in turn sapped the bid for equities. Cash yields, meanwhile, were higher following data that showed industrial production and retail sales both above estimates, but highlighted an uneven recovery.
• SOUTH KOREA: Futures were pressured lower throughout the session after gapping lower at the open and sales accelerated after a poorly received auction that saw a 30bps yield concession from the previous sale. Equity markets jumped as units of Korea Shipbuilding won orders worth a total KRW 832bn which further pressured fixed income.

EQUITIES: Stocks Fluctuate

A mixed day for stocks in Asia-Pac; Japan, Australia, South Korea and Hong Kong are in positive territory. Bourses in South Korea are supported after units of Korea Shipbuilding won orders worth a total KRW 832bn, while the Hang Seng saw gains after Xiaomi surged following a temporary halt to a US ban, while a decline in Tencent tempered gains. Markets in mainland China did manage to get into positive territory after data showed industrial production and retail sales both rose above estimates, but the move was reversed as the session wore on and the CSI 300 is currently down around 1.65%. Futures in the US are higher but off best levels, adding to gains after indices hit all time highs on Friday.

GOLD: Bullion Flat

The yellow metal has hovered around neutral levels, last at $1727.20/oz having come off session highs of $1733.99. The increase came after data from China showed industrial production and retail sales both rose above estimates. In general news flow was fairly light with markets awaiting the FOMC meeting later this week for a response to subdued inflation pressures.

OIL: Crude Rises Despite Lack Of Newsflow

Crude futures have advanced to kick off the week in Asia; WTI last up $0.53 from settlement levels at $66.14/bbl, while Brent is up $0.48 at $69.71/bbl. The demand equation is supported by robust industrial production figures from China, while markets continue to digest the OPEC+ decision to maintain limits on supplies.

UP TODAY (Times GMT/Local)