- It has been a quiet session in Asian today, with limited economic or any major headlines markets traded largely within recent ranges.
- The Yen is the top performing G10 currency today, following earlier comments from Japan's Finance Minister Kato. The USD/JPY fell 0.40% at one point briefly trading below support at 154.00 however was quickly met with buyers.
- Yields have been steady today, Tsys futures have held onto overnight gains however volumes below recent averages
- Most Asian equity markets are higher today, China onshore lagging as macro economic and geopolitical concerns linger
MARKETS
US TSYS: Tsys Futures Trade In Narrow Ranges, China & Japan Dump Tsys In Q3
- There has been little to mention in US tsys throughout the session, the curve has flattened slightly. Tsys future volumes are below averages. Tsys futures ended Monday at session highs, and while ranges have been tight today, we are trading above yesterday's highs. TU +00⅜ at 102-22, while TY is +02 at 109-22.
- Cash tsys yields are trading 0.5-1.5bps lower. The 2yr is trading -0.8bps at 4.272%, while the 10yr is trading -1bps at 4.404%, it breached 4.50% briefly on Friday, which now acts as key resistance.
- Foreign holdings of Tsys rose by $169.5b in September to $8.67t, driven by increases in the UK, Luxembourg, and Belgium, despite declines in Japan and China. Japan and China, two of the largest foreign holders of us tsys, sold significant amounts in Q3, with Japan offloading a record $61.9b whil China sold $51.3b. The selloff was driven by concerns over inflationary policies expected under President-elect Trump, geopolitical risks, and interventions in currency markets. Despite these sales, Japan and China still hold $1.02t and $731b in tsys, respectively.
- Multiple banks were out with yield forecasts earlier this morning, MS sees the 10yr at 3.75% by mid 2025, GS sees the 10yr at 4.25%-4.30% in 2025 while BofA now sees just 75bps of cuts to come and that the easing cycle will end in June.
- Projected rate cuts have held steady to start the week vs Friday close (*) : Dec'24 cumulative -14.5bp (-14.5bp), Jan'25 -23.1bp (-23.1bp), Mar'25 -37.7bp (-37.6bp), May'25 -45.9bp (-45.3bp).
- Building Permits & Housing Starts at 0830ET, BLS releases State-level payrolls and unemployment data for Oct at 1000ET. US Treasury auctions $80B 42D CMBs. Fed speak: KC Fed Schmid economic outlook (text TBA, Q&A) at 1310ET.
JGBS: Richer But A Subdued Data-Light Session
JGB futures are stronger, +6 compared to the settlement levels.
- Today, the local calendar was light.
- Mitsubishi UFJ Chairman Kanetsugu Mike, speaking at the Global Financial Leaders’ Investment Summit in Hong Kong, stated that their house view anticipates the Bank of Japan raising policy rates to a "neutral rate" of 1% by March 2026. He also suggested the likelihood of one additional rate hike in the current fiscal year, which ends in March 2024. (per BBG)
- Cash US tsys are ~1bp richer across benchmarks in today’s Asia-Pac session. On tap for today in the US: Building Permits, Housing Starts and KC Fed Schmid speaks on the economic outlook.
- Hopes that the BOJ may skip a rate hike in December appear to have provided some support for the JGB market after yesterday’s remarks from Governor Ueda.
- Cash JGBs are 1-2bps richer across benchmarks, with a slight flattening bias. The benchmark 10-year yield is 1.5bps lower at 1.068% versus the cycle high of 1.108%.
- The swap curve has twist-steepened, pivoting at the 20-year, with rates 2bps lower to 2bps higher. Swap spreads are tighter out to the 7-year and wider beyond.
- Tomorrow, the local calendar will see Trade Balance, Machine Tool Orders and Tokyo Condominiums for Sale data.
AUSSIE BONDS: Richer, RBA Minutes Fail To Move Market
ACGBs (YM +3.0 & XM +3.5) are stronger after dealing in narrow ranges.
- The RBA Minutes for the November meeting failed to be a market mover.
- The minutes noted that “more than one good quarterly inflation outcome” would be needed for it to be “confident” that inflation was sustainably returning to target if it turned out that the temporarily lower headline inflation resulted in a greater drop in inflation expectations and indexation.
- Q4 CPI is released on January 29 and Q1 at the end of April, thus May 20 may be the earliest meeting for a rate cut, consistent with current market pricing. The RBA remains ready to “adjust” policy.
- Cash US tsys are ~1bp richer across benchmarks in today’s Asia-Pac session.
- Cash ACGBs are 3-4bps richer with the AU-US 10-year yield differential +16bps.
- Swap rates are 3-4bps lower.
- The bills strip has bull-flattened, with pricing flat to +3.
- RBA-dated OIS pricing is 1-3bps softer across 2025 meetings.
- Tomorrow, the local calendar will see the Westpac Leading Index alongside the AOFM’s planned sale of A$800mn of the 4.25% 21 December 2035 bond. The AOFM also plans to sell A$700mn of the 2.75% 21 November 2028 bond on Friday.
NZGBS: Strong Close Driven By Global Bonds
NZGBs closed firmly, with benchmark yields ending at session lows, down 5-6bps. With no local economic data on the calendar today and 10-year yield differentials against other $-bloc counterparts largely unchanged, the move appears to have been driven by offshore influences rather than domestic factors.
- Cash US tsys are ~1bp richer across benchmarks in today’s Asia-Pac session after yesterday’s modest gains. On tap for today in the US: Building Permits, Housing Starts and KC Fed Schmid speaks on the economic outlook.
- Swap rates closed 5-7bps lower with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed 4-8bps softer for meetings in 2025. A cumulative 92bps of easing is priced by February, with 52bps by year-end.
- The local calendar is light for the remainder of the week. The next key release will be Q3 Retail Sales ex Inflation next Monday.
- On Thursday, the NZ Treasury plans to sell NZ$200mn of the 3.0% Apr-29 bond, NZ$225mn of the 2.0% May-32 bond and NZ$75mn of the 1.75% May-41 bond.
OIL: Crude Holds Onto Gains As US$ Softens
Oil prices are little changed during APAC trading today holding onto Monday’s sharp gains driven by increased geopolitical threats to global supply. Brent is 0.2% higher at $73.46/bbl but has moved in a narrow range. WTI is up 0.2% to $69.32, close to the intraday high. The USD index is down 0.1% after falling 0.4% yesterday, which has provided significant support for dollar-denominated crude.
- Reuters reported that a US ceasefire agreement has been agreed by Hezbollah/Lebanon, but the US has warned that negotiations continue.
- Supply/demand fundamentals remain in focus with a market surplus forecast for next year and futures signalling expectations for ample supply. The IEA is projecting a surplus of over 1mbd driven by soft China demand. US industry-based inventory data are released later today. Stock builds have been limited in the US in recent months.
- Later the Fed’s Schmid speaks on the economic outlook. Also the ECB’s Elderson and BoE’s Bailey talk. US October housing starts/permits and Canadian October CPI print.
GOLD: Sharp Rebound From Oversold Conditions
Gold is 0.5% higher in today’s Asia-Pac session, after closing 1.9% higher at $2611.83 yesterday.
- Precious metals benefitted from the pullback in the dollar yesterday. The precious metal had been hit by the greenback rallying to a two-year high following Donald Trump’s election win, as well as signs the Fed may have to slow the pace of rate cuts due to the inflationary policies the president-elect is pledging. Lower rates are typically positive for gold, which doesn’t pay interest.
- Yesterday Goldman Sachs reiterated its forecast for gold to reach $3,000/oz next year, noting that the recent sell-off provided an attractive entry point to buy the yellow metal.
- According to MNI’s technicals team, the long-term trend condition in gold remains bullish, with firm resistance seen at $2,653.2, the 20-day EMA.
- Meanwhile, silver is outperforming and was up over 2.5%. For silver, bullish conditions remain intact and the bear cycle that started on Oct 23 appears to be a correction - for now. Initial firm resistance to watch is $31.594, the 20-day EMA.
LNG: Threats To European Supply Drive Prices Higher
European natural gas prices rose 1.3% to EUR 47.15 to be up 16.2% in November, as concerns over Russian flows to Europe grow with the announcement of Ukraine being able to use US missiles to target some sites in Russia, which may threaten its gas infrastructure. The market is also worried about the expiry at the end of 2024 of the deal to allow Russian gas to flow through Ukraine, while flows have been cut off to Austria because of a dispute.
- European industrial demand is likely to remain soft with the sector continuing to struggle but northwest Europe is forecast to face a cold snap increasing heating consumption. Austria may now drawdown from inventories.
- Russia’s Gazprom continues to supply other European countries, including Slovakia, and flows through Ukraine remain at usual levels.
- Morgan Stanley revised up its forecast for Q1 2025 benchmark Dutch gas prices by 8% due to the increase in market tightness, according to Bloomberg.
- US natural gas rose 4.2% to $2.94 to be 8.6% higher this month driven by expectations for cooler weather across much of the US at the end of November and into December, according to Atmospheric G2.
- North Asian prices followed Europe higher as the two regions compete for global supplies. China’s import volumes in October rose 28% y/y.
ASIA STOCKS: Asian Equities Edge Higher As Commodities Find Support
Asian equities are broadly higher today, buoyed by optimism in U.S. equities and easing yields. South Korean stocks rose modestly, led by Samsung following a share buyback plan and strong gains in oil refiners and gaming stocks. Japanese equities gained as a weaker yen boosted exporters like Toyota. Gold miners rallied across Asia, tracking bullion’s rise after Goldman Sachs reaffirmed its $3,000 price target by 2025. In Australia, the ASX neared record highs on bullish mining sector forecasts from Morgan Stanley. Meanwhile, Hong Kong investors focused on a key financial summit amid concerns over China’s economic challenges and property sector woes. Oil prices stabilized after Monday's geopolitical-driven surge, while Bitcoin traded near all-time highs.
- Investors are eagerly await Nvidia's earnings which will be reported on Nov 21. Semiconductor stocks have struggled the past week, the Philadelphia SE Semiconductor Index did gain 1.13% on Monday, although still trades 5.19% lower for the past week.
- Foreign investors continue to sell South Korean equities, although momentum is slowing with just -$67m of outflows so far today.
- US equity futures are slightly higher today, with Nasdaq 100 futures continuing to outperform both S&P 500 and Dow futures. However ranges are tight.
- Looking at S&P 500 Eminis technicals, the move lower last week appears corrective. Medium-trend signals such as moving average studies, continue to highlight a dominant uptrend. The contract tested the 20-day EMA on Friday, however trades back above it at the moment. The next key support to monitor is 5833.83, the 50-day EMA. A clear break of this level would signal scope for a deeper retracement. A resumption of gains would refocus attention on the bull trigger at 6053.25, the Nov 11 high.
ASIA STOCKS: China & HK Equities Mixed Amid Macro Concerns
Chinese and Hong Kong stocks are trading mixed today, The HSI is 0.3% higher, supported by optimism around China’s pledges to boost Hong Kong’s role as a financial hub and solid earnings from Trip.com Group (+5.2%) and Zijin Mining (+4.8%). However, onshore markets underperformed, with the CSI 300 and Shanghai Composite Index declining 0.5% amid concerns over China's macroeconomic outlook and lingering investor skepticism. Broader Asian markets saw gains, but the muted performance in China reflects caution despite policy support.
- The youth unemployment rate for the 16-24 age group dropped slightly to 17.1% in October but remains a significant concern as a record 12.22 million university graduates are expected next year, adding pressure to the labor market.
- Speaking at the HKMA forum Goldman Sachs CEO David Solomon and Morgan Stanley CEO Ted Pick called for improved transparency and eased capital movement restrictions to revive investor confidence in China’s markets.
- ETFs focused on investing in Chinese stocks faced significant outflows last week, with the iShares China Large-Cap ETF (FXI) losing $984m and the KraneShares CSI China Internet ETF (KWEB) seeing $710m in withdrawals.
- Chinese onshore equities have underperformed today, with Real Estate & Telecom stocks contributing the most to the markets losses. The CSI 300 Real Estate Index is 2% lower, while Telecom Index trades 1.95% lower. Hong Kong equities are higher across the board, however ranges are tight, with no real standout sector today.
ASIA STOCKS: Foreign Investors Continue Selling Asian Equities
Another day of muted flows, Taiwan saw the largest outflows likely linked to weakness in the semiconductor space, while South Korea benefitted from Samsung announcing a share buy back program. Thailand saw an inflow well above recent averages, while the rest of Asia EM continued to see outflows following the US election.
- South Korea: Recorded outflows of -$58m yesterday, with a 5-day total of -$884m. YTD flows remain positive at +$5.95b. The 5-day average is -$177m, worse than the 20-day average of -$148m and the 100-day average of -$110m.
- Taiwan: Posted outflows of -$329m yesterday, totaling -$3.75b over the past 5 days. YTD flows remain negative at -$15.11b. The 5-day average is -$750m, worse than the 20-day average of -$205m and the 100-day average of -$222m.
- India: Experienced outflows of -$177m yesterday, with a 5-day outflow of -$465m. YTD flows are negative at -$2.75b. The 5-day average is -$93m, better than the 20-day average of -$265m but worse than the 100-day average of -$12m.
- Indonesia: Posted outflows of -$62m yesterday, bringing the 5-day total to -$258m. YTD flows remain positive at +$1.88b. The 5-day average is -$52m, worse than the 20-day average of -$53m but better than the 100-day average of +$23m.
- Thailand: Recorded inflows of +$49m yesterday, with a total outflow of -$52m over the past 5 days. YTD flows are negative at -$3.68b. The 5-day average is -$10m, better than the 20-day average of -$27m but worse than the 100-day average of -$7m.
- Malaysia: Experienced outflows of -$2m yesterday, contributing to a 5-day outflow of -$37m. YTD flows are positive at +$227m. The 5-day average is -$7m, better than the 20-day average of -$21m but worse than the 100-day average of +$4m.
- Philippines: Saw outflows of -$22m yesterday, with net outflows of -$111m over the past 5 days. YTD flows remain negative at -$212m. The 5-day average is -$22m, worse than the 20-day average of -$15m and the 100-day average of +$3m.
Table 1: EM Asia Equity Flows
GLOBAL MACRO: MicroStrategy Purchaes Over $4b Of Bitcoin The Past Week
MicroStrategy (MSTR) purchased a record $4.6b worth of Bitcoin between Nov 11 to 17, adding 51,780 tokens and bringing its total holdings to 331,200 Bitcoin, valued at approximately $30b. The company, now the largest institutional Bitcoin holder, financed its purchases through share and convertible debt sales, including a $1.75b note offering announced Monday. Investors have embraced this strategy, with MicroStrategy's stock surging over 400% ytd, making it one of the top-performing stocks in 2024.
- BTC rose 14% during the time at which MSTR was purchasing bitcoin, with 12% of that occurring on the 11th.
FOREX: US$ Continues Trending Lower, Yen, A$ & IDR Benefit
After strengthening following the US election result, the US dollar has begun to normalise this week as US yields found a ceiling. The USD BBDXY index fell 0.4% on Monday and is down slightly during a data-light APAC session today. The yen and Aussie have been the main G10 beneficiaries and IDR/MYR in EM Asia.
- USDJPY is down 0.2% to 154.40 off the intraday low of 154.05. The yen strengthened after Finance Minister Kato reiterated the ministry’s commitment to FX stability and to move against excess currency volatility.
- Aussie outperformed on Monday and AUDUSD is up another 0.1% today to 0.6517 off the intraday high of 0.6524. It has spent most of the session above 65c. AUDNZD is up 0.2% to 1.1058 as the November meeting minutes showed the RBA firmly on hold, while the RBNZ is widely expected to cut rates again next week.
- NZDUSD is flat at 0.5893 after a high of around 0.5900.
- European currencies are little changed with EURUSD down slightly to 1.0592 and GBPUSD steady at 1.2678.
- USDIDR is down 0.3% to 15,811 ahead of Wednesday’s BI decision. It is expected to keep rates on hold but a minority are forecasting a 25bp rate cut.
- USDKRW is down 0.4% to 1391.15. USDCNH is slightly higher at around 7.2317.
- Later the Fed’s Schmid speaks on the economic outlook. Also the ECB’s Elderson and BoE’s Bailey talk. US October housing starts/permits and Canadian October CPI print.
NEW ZEALAND: Household Inflation Expectations Running Ahead Of Businesses
The RBNZ’s household inflation expectations for Q4 were released today and provided a mixed picture. The median perception of current inflation remained elevated at 6.0%, while 1-year out eased 0.5pp to 3%, the top of the RBNZ’s target band. Expectations 2- and 5-years ahead were stable at 3.0%. The 1-year mean was found by the central bank to have a high correlation with underlying inflation, but this measure was sticky at 4.1% and is well above 1-year business inflation expectations at 2.1%.
- There was a pickup in those expecting house prices to 43.8% from 35.1% in Q3. The median 1-year ahead expectations was for prices to be flat, while the mean was a 2.2% rise. House price inflation in 5-years is expected to be up 5%, unchanged from Q3.
NZ RBNZ inflation expectations vs core CPI y/y%
AUSSIE BONDS: AU-US 10Y Diff. ~15bps Tighter Since US Election
The AU-US 10-year cash yield differential is at +15bps today, roughly 15bps narrower than levels observed in the lead-up to the US presidential election. Prior to the election, the differential was near the upper end of the +/-30bps range that has largely prevailed since November 2022.
- A simple regression of the AU-US 10-year yield differential against the AU-US 1Y3M swap differential over the past year suggests that the current 10-year yield differential is close to fair value, estimated at +13bps.
- The 1Y3M differential serves as a proxy for the anticipated relative policy trajectory over the next 12 months.
- Since mid-September, the AU-US 1Y3M differential has narrowed by approximately 50bps.
Figure 1: AU-US Cash 10-Year Yield Differential (%)
Source: MNI – Market News / Bloomberg
RBA: Inflation In Band In 2026 With No "Near Term" Rate Change
The minutes noted that “more than one good quarterly inflation outcome” would be needed for it to be “confident” that inflation was sustainably returning to target, if it turned out that the temporarily lower headline inflation resulted in a greater drop in inflation expectations and indexation. Q4 CPI is released on January 29 and Q1 at the end of April, thus May 20 may be the earliest meeting for a rate cut, consistent with current market pricing. The RBA remains ready to “adjust” policy.
- The Board observed that the OCR assumption used in the updated forecasts, based on market pricing, didn’t include “any change” in the “near term” – a return of the phrase that Governor Bullock used a few months ago to dampen rate cut expectations. With the economy developing as expected and staff projections evaluated as “consistent” with the Board’s “strategy”, there was no “need” to change rates. The market has the first full 25bp rate cut in May 2025.
- The RBA’s OCR profile includes close to one 25bp rate cut by mid-2025 with almost another two by end-2025 followed by one in H1 2026.
- With the risks around its forecasts “balanced”, the Board is prepared to change rates in either direction and discussed scenarios that would drive a shift or a continuation of the prolonged hold.
- It discussed downside and upside surprises to consumption growth from consumer confidence and household wealth & cash flows, and the labour market from staff hoarding. Its business liaison programme was yet to widely report layoffs and no intention to fill vacancies.
- The supply side was seen as a risk that may require tighter policy if the estimate of potential growth was “too optimistic” and productivity continued to disappoint. The other upside risk is if rates are not as “restrictive” as the Board believes and it is monitoring bank lending and asset prices to judge this.
- Risks from overseas cannot yet be estimated due to a lack of detail.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 19/11/2024 | 0845/0945 |  EU | ECB's Elderson at 10th Green Finance Forum | |
| 19/11/2024 | 0900/1000 | ** | EU | EZ Current Account |
| 19/11/2024 | 1000/1100 | *** | EU | HICP (f) |
| 19/11/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 19/11/2024 | 1000/1000 | GB | BOE's Bailey, Lombardelli, Mann and Taylor at TSC | |
| 19/11/2024 | 1330/0830 | *** |  CA | CPI |
| 19/11/2024 | 1330/0830 | *** |  US | Housing Starts |
| 19/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 19/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 19/11/2024 | 1810/1310 | US | Kansas City Fed's Jeff Schmid | |
| 20/11/2024 | 2350/0850 | ** |  JP | Trade |
| 20/11/2024 | 0001/0001 | * | GB | Brightmine pay deals for whole economy |
| 20/11/2024 | 0700/0800 | ** |  DE | PPI |
| 20/11/2024 | 0700/0700 | *** | GB | Consumer inflation report |
| 20/11/2024 | 0700/0700 | *** | GB | Producer Prices |
| 20/11/2024 | 1000/1100 | ** | EU | Construction Production |
| 20/11/2024 | 1200/0700 | ** | US | MBA Weekly Applications Index |