Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis
on key political risk impacting the global markets.
Sign up now for free trial access to this content.
Please enter your details below.
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.
Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical
decision-making.
Focus remains on the global bond sell off, which extended to Asia Pac today, particularly Australian markets. US Tsy futures continue to push lower and now comfortably trade below Monday's low.
This has seen yen underperform in the G10 space, particularly against AUD and NZD.
Oil is relatively steady, as US officials again head to Israel.
Looking ahead, we have US data in terms of the Richmond Fed survey, while the BoE's Bailey will also speak. We also hear from the ECB's Lagarde.
Tsys futures continue to push lower and now comfortably trade below Monday's lows, volumes are almost double those of recent averages. The front-end is holding up better than further out the curves although it has given back earlier gains. TU is - 01 at 103-08, while TY is -06+ at 111-10 and has broken below 111-14 (50.0% retracement of the Apr - Sep bull cycle (cont)), with next support seen at the July 22 lows of 111-00.
The cash tsys curve has bear-steepened, an earlier TU/UXY block steepener looks to have contributed to the sell-off over the past few hours. The 2yr is +1bps at 4.041%, while the 10yr is +1.8bps at 4.214% back at July 26 highs. The 2s10s is +1bps at 17.253, the steepest since Sept 27th
The 10yr yield have been tracking the Polymarket Trump v Harris spread, with Trump taken a commanding lead with odds now 63.5% vs 36.3%, while the 10yr yield is now 60bps off the September lows.
The Fed's Mary Daly stated that the Fed is likely to continue cutting interest rates to protect the labor market from further weakening, noting no signs to halt rate reductions. Last month, the Fed lowered rates by half a percentage point to 4.75%-5%, with Daly supporting the larger cut due to labor market concerns. There was little reaction from tsys following her comments.
JGB futures are weaker but off session cheaps, -31 compared to settlement levels.
The MoF sold ¥350bn of 10-year climate transition notes at a slightly lower-than-expected cut-off yield, signaling decent investor demand. The cut-off yield was 0.943%, compared with 0.945% estimated by traders in a Bloomberg survey.
Cash US tsys have extended yesterday’s sharp back-up in yields. US yields are currently flat to 2bps higher, with a steepening bias, after being 1-2bps lower early in the session. The focus is now on home sales, flash PMIs and weekly claims, durables and UofM sentiment later this week.
Cash JGBs are 2-4bps cheaper across benchmarks. The benchmark 10-year yield is 1.7bps higher at 0.981% versus the cycle high of 1.108%.
Swap rates are flat to 1bp higher, with swap spreads tighter.
Tomorrow, the local calendar is empty, ahead of Jibun Bank PMIs, Weekly International Investor Flow and Machine Tool Orders data on Thursday. Thursday will also see 20-year supply.
Tokyo CPI prints on Friday, while this weekend is the legislative elections, where new PM Ishiba's ruling party is struggling in the polls.
ACGBs (YM -11.0 & XM -14.5) are weaker and at session cheaps, as cash US tsys extend yesterday’s sharp back-up in yields. US yields had been 1-2bps lower early in the session. The local calendar was empty today and will be light again tomorrow.
Cash ACGBs are 10-14bps cheaper with the AU-US 10-year yield differential at +21bps.
The cash 3/10 curve steepened by 4bps, reaching its highest level since early November 2023. The ACGB 3/10 cash curve has been closely aligned with recent upward pressure on the US 10-year tsy yield. This is reflected in the 30-day correlation between the two, which has returned to positive territory after two months in negative territory. Since mid-September, the US 10-year yield has risen by 55-60bps. Over the same period, the ACGB 3/10 cash curve has steepened by 15bps, now standing at 50bps.
Swap rates are 10-14bps higher, with the 3s10s curve steeper.
The bills strip has bear-steepened, with pricing -3 to -11.
RBA-dated OIS pricing is 4-11bps firmer for 2025 meetings, with late-2025 leading. A cumulative 3bps of easing is priced by year-end.
Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$800mn of the 4.25% 21 December 2035 bond.
The cash ACGB curve steepened by 4bps today, reaching its highest level since early November 2023.
With RBA easing expectations having already been unwound on the back of stronger domestic data, the ACGB 3/10 cash curve has been closely aligned with recent upward pressure on the US 10-year tsy yield. This is reflected in the 30-day correlation between the two, which has returned to positive territory after two months in negative territory.
Since mid-September, the US 10-year yield has risen by 55-60bps. Over the same period, the ACGB 3/10 cash curve has steepened by 15bps, now standing at 50bps.
This correlation suggests that global yield dynamics are exerting significant influence on Australian bond markets, despite the local economic backdrop.
RBA-dated OIS pricing is 4-11bps firmer for 2025 meetings, with late-2025 leading.
Currently, the market is pricing in a modest 3bps of easing by the end of the year, positioning the expected cash rate at its highest level since late July.
This reflects the market's adjustment to stronger domestic and US economic data, which has tempered expectations for rate cuts in the near term.
Figure 1: Official Rate: Current Vs. Year-End Market Expectations
The NZGB 2/10 curve twist-steepened, with yields closing 1bp lower to 4bps higher, after a dramatic mid-session reversal. Earlier in the session, NZGB yields had been 4-7bps cheaper after the US tsys negative lead-in from the NY session.
NZ-US and NZ-AU 10-year yield differentials narrowed an impressive 7-8bps on the day.
With the local calendar light, the reversal of fortune appeared linked to record investor interest in today’s government bond issue. NZDM issued $5bn of the May-30 bond via a syndicated tap, with the total book size topping $23.9bn. The previous record book size was $22.760bn for the Aug-36 line. Bonds were issued at +15 bps over Apr-29 bond, with a yield to maturity of 4.17%.
Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session, extending yesterday’s sharp back-up in yields. Yields had been 1-2bps lower early in the session.
Swap rates closed 3-7bps higher, with the 2s10s curve steeper and implied swap spreads 2-3bps wider.
RBNZ dated OIS pricing is 2bps softer to 4bps firmer, with July 2025 underperforming. A cumulative 103bps of easing is priced by February, with 57bps by year-end.
Tomorrow, the local calendar is empty. RBNZ Governor Adrian Orr will speak about monetary policy at the Peterson Institute on Thursday.
The USD BBDXY index sits slightly lower in the first part of Tuesday dealings, last near 1256.6, but there has been greater focus on AUD and NZD outperformance, particularly against the yen.
USD/JPY has hit fresh multi month highs, getting to 151.10, but sits slightly lower now, last near 150.90. Earlier comments crossed from the Deputy Cabinet Secretary that he would not comment on current FX rate (per BBG).
We also heard from BoJ official Kato that the central bank is not targeting a specific FX level, but is watching upside risks from import prices closely. Kato also stated the central bank is watching US economy/election risks as well (per Jiji/RTRS).
The turnaround in US yields, which were softer in the first part of trade, to tick higher (now up a little over 1bps at the back end), helped push USD/JPY higher.
AUD and NZD both sit around 0.40% higher. AUD/USD last near 0.6680/85, while NZD is near 0.6055.
We have seen a very sharp sell off in Aussie bonds, with yields up over 14bps for the 10yr. This looks globally driven on US/EU spill over, but has nevertheless likely helped the AUD today.
China/HK equities have also tracked higher to the break, another marginal positive. US equity futures hold lower at this stage.
Looking ahead, we have US data in terms of the Richmond Fed survey, while the BoE's Bailey will also speak. We also hear from the ECB's Lagarde.
Asian markets are mostly lower today, largely just a continuation from overnight on Wall street. US tsys yields are reversing earlier gains, there is uncertainty in Japan surrounding the upcoming general election and weak domestic demand have also weighed on the local market. It is a quiet week for economic data in the region this week
China & Hong Kong equities are little changed today, Ping An Insurance's reported strong quarterly earnings, while Chinese electric-vehicle makers saw a rise in their shares after surpassing sales estimates for the week starting Oct. 7, with sales showing a 62% w/w growth, significantly stronger than initial forecasts.
Short selling of HK listed equities hit its lowest in three and a half years, thanks to a rally triggered by a series of Chinese stimulus measures. Short positions made up only 9.7% of total turnover on Friday, a level not seen since April 2021, although it edged slightly higher to 10.7% on Monday.
Asian Tech stocks are struggling today, with Samsung (-1.30%), TSMC (-1.40%), Tokyo Electron (-2.50%) which has weighed on teh tech heavy KOSPI (-1%) & TAIEX (-0.60%). Foreign investors have returned to selling South Korean stocks with $144m of outflows so far today, with majority coming from tech stocks, although there has been buying of Financial stocks.
Australian equities are the worst performing in the region today, with all sectors in the red. There doesn't seem to be much of a catalyst for the underperformance, other than caution heading into the US election, investors looking to book profit after the ASX200 recently made new all time highs. Today the ASX200 is trading 1.60% lower.
Taiwan continues to benefit following strong results from TSMC. India has now marked 14 straight session's of selling by foreign investors.
South Korea: Recorded inflows of +$128m yesterday, bringing the 5-day total to -$926m. YTD flows remain positive at +$8.90b. The 5-day average is -$185m, similar to the 20-day average of -$183m and worse than the 100-day average of -$64m.
Taiwan: Saw strong inflows of +$758m yesterday, with +$2.27b over the past 5 days. YTD flows remain deeply negative at -$10.26b. The 5-day average is +$455m, better than the 20-day average of +$254m and the 100-day average of -$160m.
India: Experienced outflows of -$612m yesterday, with a total of -$2.39b over the past 5 days. YTD inflows stand at +$1.93b. The 5-day average is -$478m, worse than both the 20-day average of -$350m and the 100-day average of +$45m.
Indonesia: Posted inflows of +$21m yesterday, bringing the 5-day total to +$118m. YTD flows remain positive at +$2.94b. The 5-day average is +$24m, better than the 20-day average of -$41m and slightly lower than the 100-day average of +$32m.
Thailand: Recorded outflows of -$21m yesterday, with -$50m over the past 5 days. YTD flows are negative at -$3.15b. The 5-day average is -$10m, better than the 20-day average of -$31m and similar to the 100-day average of -$12m.
Malaysia: Saw inflows of +$9m yesterday, contributing to a 5-day inflow of +$118m. YTD flows stand at +$662m. The 5-day average is +$24m, better than the 20-day average of -$15m and in line with the 100-day average of +$6m.
Philippines: Reported minor inflows of +$3m yesterday, with net inflows of +$31m over the past 5 days. YTD flows are +$100m. The 5-day average is +$6m, slightly lower than the 20-day average of +$12m and in line with the 100-day average of +$4m.
Ahead of next month’s US Presidential Election, US officials arrived in the Middle East hoping to secure a cease fire in the war
Secretary of State Antony Blinken will visit Israel whilst US envoy Amos Hochstein headed to Beirut.
The Head of the International Energy Agency Fatih Birol told BBG TV in Singapore on Monday that “If we don’t see a major escalation of the situation in the Middle East, I still expect that oil prices will be further under pressure because we are entering a period, including next year, of more comfortable markets.”
Brent’s prompt spread — the difference between its two nearest contracts — has narrowed in recent weeks, suggesting physical conditions are becoming less tight. The differential was 35 cents a barrel in backwardation, compared with 69 cents about a month ago.
WTI had traded up through US$71/bbl during yesterday's trading session and gave back earlier gains later to be at $70.43.
Brent followed a similar trend trading up through US$74.50/bbl and is down at $74.08 this morning.
Middle East tensions continue to simmer following a drone attack on Israeli PM Benajmin Netanyahu’s home which was followed swiftly by attacks on Hezbollah strongholds in Lebanon.
Also, in Singapore the CEO of Saudi Aramco spoke as news that China banks were cutting lending rates to support the economy saying he was bullish on consumption patterns in China as ongoing stimulus measures begin to impact the world’s largest oil importer.
Gold is 0.3% higher in today’s Asia-Pac session, after closing steady on Monday, having risen to a fresh record high of $2,740.6 earlier in the session.
There was no obvious headline for the pullback from the highs, as higher Treasury yields and the bid in the dollar started to reassert themselves.
There was little reaction to MN Fed Kashkari town hall event, where he said rates will surge if the US deficit "goes to the moon". Meanwhile, Kansas City Federal Reserve President Jeff Schmid said Monday aftermarket that he prefers the central bank scale back rate cuts to more modest adjustments. Hence, there is time to observe the economy’s reaction and to assess the neutral rate, which is likely "well above" what it was in the decade before the pandemic.
Lower rates are typically positive for gold, which doesn’t pay interest.
According to MNI’s technicals team, technicals remain bullish, with sights on $2,767.1 next, the 3.236 projection of the Jul 25 - Aug 2 - Aug 5 price swing.
China September data on FX settlements showed a return to surplus, with $48.2bn, up from the deficit of -$1.2bn in the prior month. For September, banks bought $238bn of foreign currency, and sold a total $190bn on behalf of clients (resulting in the above surplus).
This was the strongest surplus since the last month of 2020. Positive or surplus settlements months, or at least trending in that direction, typically coincide with firmer backdrops for the yuan.
The yuan had already been tracking stronger through August, while settlement activity may have picked up in the second half of Sep as we approach the 7.00 handle.
Stimulus hopes, coupled with Fed easing expectations, weighed on USD/CNY, although some of these trends have obviously stabilized/reversed somewhat in Oct to date.
The FX regulator from SAFE who also spoke as this data cross, the broader backdrop for the yuan and the BOP is basically stable.
South Korea’s Producer Price Index rose +1.0% for September.
This represents a material decline from August’s rise of +1.6% and MoM saw a decline of -0.2%.
For the month, the key positive contributor came from Agriculture/Forestry and Marine which rose +3.8% whilst manufactured products decline -0.7%.
This will be watched closely by the Bank of Korea who cut rates in their last meeting a week ago.
With their next meeting not until the end of November, they will be watching Prices closely to see if they need to cut rates again or whether they are staring at deflation.
Spot USD/KRW last tracked near 1380, slightly weaker in won terms for the session. Earlier highs crested 1382.85, which was sub intra-session highs from Monday trade, 1384.5.
Headlines have crossed from EDaily (via BBG) that the authorities are closely monitoring the FX market.
As we noted in our morning KRW update, we might not be too far away from a point where the authorities start to push back against won weakness.
Spot USD/KRW is getting into the zone of 1380/1400 which marked earlier YTD highs. The slump in the won since the start of the month is also approaching 5% (assuming current levels hold into month end). This would be the largest monthly drop since early 2023, see the chart below.
China Tries New Tack to Spur Economic Growth Through Stimulus Effort (source: CAIXIN)
China has unveiled new rules governing the export of items that can be used for either civilian or military purposes, as tech rivalry with the United States increases amid allegations that Chinese exports are being used for military purposes (source: CAIXIN).
China equity markets bucking regional trends as news emerges of companies tapping the newly created government swap facility to support equity investments. Shanghai comp up +0.53% whilst bonds were unchanged.
Aggregate demand is poised to shrug off the temporary slowdown in momentum in the second quarter of FY25, as festival demand picks up pace and consumer confidence improves, the Reserve Bank of India's (RBI) October bulletin said (source: BBG).
The Indian rupee, which fell past 84 to the dollar to hit a new record low this month, is on a downward path as geopolitical risks boost oil prices and as money flows out of local stocks amid a shift toward China (source: BBG).
India’s Nifty 50 weak today down -0.35% whilst bonds were unchanged.
2yr 6.664% 5yr 6.737% 10yr 6.835% 30yr 6.975%
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
22/10/2024
0600/0700
***
GB
Public Sector Finances
22/10/2024
0900/1000
*
GB
Index Linked Gilt Outright Auction Result
22/10/2024
1230/0830
*
CA
Industrial Product and Raw Material Price Index
22/10/2024
1230/0830
**
US
Philadelphia Fed Nonmanufacturing Index
22/10/2024
1255/0855
**
US
Redbook Retail Sales Index
22/10/2024
1325/1425
GB
BOE's Bailey address at Bloomberg Global Regulatory Forum
22/10/2024
1345/1445
GB
BOE's Greene fireside chat with Josh Lipsky
22/10/2024
1400/1000
**
US
Richmond Fed Survey
22/10/2024
1400/1600
EU
ECB's Lagarde in conversation with Francine Lacqua
22/10/2024
1500/1700
EU
ECB's Lane in fireside chat at Seminar of Bank of New York
22/10/2024
1530/1130
*
US
US Treasury Auction Result for Cash Management Bill
22/10/2024
1915/2115
EU
ECB's Lagarde in panel discussion on cross border payments
22/10/2024
2000/2200
EU
ECB's Lane at Columbia University seminar
22/10/2024
2015/2115
GB
BOE's Breeden panellist at G20 cross-border payments event
23/10/2024
0900/1000
**
GB
Gilt Outright Auction Result
23/10/2024
1100/0700
**
US
MBA Weekly Applications Index
23/10/2024
-
EU
ECB's Lagarde and Cipollone in G20 FMs and CB Governors meeting
Sign up now for free trial access to this content.
Please enter your details below.
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.
MNI (SYDNEY)
Focus remains on the global bond sell off, which extended to Asia Pac today, particularly Australian markets. US Tsy futures continue to push lower and now comfortably trade below Monday's low.
This has seen yen underperform in the G10 space, particularly against AUD and NZD.
Oil is relatively steady, as US officials again head to Israel.
Looking ahead, we have US data in terms of the Richmond Fed survey, while the BoE's Bailey will also speak. We also hear from the ECB's Lagarde.
Tsys futures continue to push lower and now comfortably trade below Monday's lows, volumes are almost double those of recent averages. The front-end is holding up better than further out the curves although it has given back earlier gains. TU is - 01 at 103-08, while TY is -06+ at 111-10 and has broken below 111-14 (50.0% retracement of the Apr - Sep bull cycle (cont)), with next support seen at the July 22 lows of 111-00.
The cash tsys curve has bear-steepened, an earlier TU/UXY block steepener looks to have contributed to the sell-off over the past few hours. The 2yr is +1bps at 4.041%, while the 10yr is +1.8bps at 4.214% back at July 26 highs. The 2s10s is +1bps at 17.253, the steepest since Sept 27th
The 10yr yield have been tracking the Polymarket Trump v Harris spread, with Trump taken a commanding lead with odds now 63.5% vs 36.3%, while the 10yr yield is now 60bps off the September lows.
The Fed's Mary Daly stated that the Fed is likely to continue cutting interest rates to protect the labor market from further weakening, noting no signs to halt rate reductions. Last month, the Fed lowered rates by half a percentage point to 4.75%-5%, with Daly supporting the larger cut due to labor market concerns. There was little reaction from tsys following her comments.
JGB futures are weaker but off session cheaps, -31 compared to settlement levels.
The MoF sold ¥350bn of 10-year climate transition notes at a slightly lower-than-expected cut-off yield, signaling decent investor demand. The cut-off yield was 0.943%, compared with 0.945% estimated by traders in a Bloomberg survey.
Cash US tsys have extended yesterday’s sharp back-up in yields. US yields are currently flat to 2bps higher, with a steepening bias, after being 1-2bps lower early in the session. The focus is now on home sales, flash PMIs and weekly claims, durables and UofM sentiment later this week.
Cash JGBs are 2-4bps cheaper across benchmarks. The benchmark 10-year yield is 1.7bps higher at 0.981% versus the cycle high of 1.108%.
Swap rates are flat to 1bp higher, with swap spreads tighter.
Tomorrow, the local calendar is empty, ahead of Jibun Bank PMIs, Weekly International Investor Flow and Machine Tool Orders data on Thursday. Thursday will also see 20-year supply.
Tokyo CPI prints on Friday, while this weekend is the legislative elections, where new PM Ishiba's ruling party is struggling in the polls.
ACGBs (YM -11.0 & XM -14.5) are weaker and at session cheaps, as cash US tsys extend yesterday’s sharp back-up in yields. US yields had been 1-2bps lower early in the session. The local calendar was empty today and will be light again tomorrow.
Cash ACGBs are 10-14bps cheaper with the AU-US 10-year yield differential at +21bps.
The cash 3/10 curve steepened by 4bps, reaching its highest level since early November 2023. The ACGB 3/10 cash curve has been closely aligned with recent upward pressure on the US 10-year tsy yield. This is reflected in the 30-day correlation between the two, which has returned to positive territory after two months in negative territory. Since mid-September, the US 10-year yield has risen by 55-60bps. Over the same period, the ACGB 3/10 cash curve has steepened by 15bps, now standing at 50bps.
Swap rates are 10-14bps higher, with the 3s10s curve steeper.
The bills strip has bear-steepened, with pricing -3 to -11.
RBA-dated OIS pricing is 4-11bps firmer for 2025 meetings, with late-2025 leading. A cumulative 3bps of easing is priced by year-end.
Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$800mn of the 4.25% 21 December 2035 bond.
The cash ACGB curve steepened by 4bps today, reaching its highest level since early November 2023.
With RBA easing expectations having already been unwound on the back of stronger domestic data, the ACGB 3/10 cash curve has been closely aligned with recent upward pressure on the US 10-year tsy yield. This is reflected in the 30-day correlation between the two, which has returned to positive territory after two months in negative territory.
Since mid-September, the US 10-year yield has risen by 55-60bps. Over the same period, the ACGB 3/10 cash curve has steepened by 15bps, now standing at 50bps.
This correlation suggests that global yield dynamics are exerting significant influence on Australian bond markets, despite the local economic backdrop.
RBA-dated OIS pricing is 4-11bps firmer for 2025 meetings, with late-2025 leading.
Currently, the market is pricing in a modest 3bps of easing by the end of the year, positioning the expected cash rate at its highest level since late July.
This reflects the market's adjustment to stronger domestic and US economic data, which has tempered expectations for rate cuts in the near term.
Figure 1: Official Rate: Current Vs. Year-End Market Expectations
The NZGB 2/10 curve twist-steepened, with yields closing 1bp lower to 4bps higher, after a dramatic mid-session reversal. Earlier in the session, NZGB yields had been 4-7bps cheaper after the US tsys negative lead-in from the NY session.
NZ-US and NZ-AU 10-year yield differentials narrowed an impressive 7-8bps on the day.
With the local calendar light, the reversal of fortune appeared linked to record investor interest in today’s government bond issue. NZDM issued $5bn of the May-30 bond via a syndicated tap, with the total book size topping $23.9bn. The previous record book size was $22.760bn for the Aug-36 line. Bonds were issued at +15 bps over Apr-29 bond, with a yield to maturity of 4.17%.
Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session, extending yesterday’s sharp back-up in yields. Yields had been 1-2bps lower early in the session.
Swap rates closed 3-7bps higher, with the 2s10s curve steeper and implied swap spreads 2-3bps wider.
RBNZ dated OIS pricing is 2bps softer to 4bps firmer, with July 2025 underperforming. A cumulative 103bps of easing is priced by February, with 57bps by year-end.
Tomorrow, the local calendar is empty. RBNZ Governor Adrian Orr will speak about monetary policy at the Peterson Institute on Thursday.
The USD BBDXY index sits slightly lower in the first part of Tuesday dealings, last near 1256.6, but there has been greater focus on AUD and NZD outperformance, particularly against the yen.
USD/JPY has hit fresh multi month highs, getting to 151.10, but sits slightly lower now, last near 150.90. Earlier comments crossed from the Deputy Cabinet Secretary that he would not comment on current FX rate (per BBG).
We also heard from BoJ official Kato that the central bank is not targeting a specific FX level, but is watching upside risks from import prices closely. Kato also stated the central bank is watching US economy/election risks as well (per Jiji/RTRS).
The turnaround in US yields, which were softer in the first part of trade, to tick higher (now up a little over 1bps at the back end), helped push USD/JPY higher.
AUD and NZD both sit around 0.40% higher. AUD/USD last near 0.6680/85, while NZD is near 0.6055.
We have seen a very sharp sell off in Aussie bonds, with yields up over 14bps for the 10yr. This looks globally driven on US/EU spill over, but has nevertheless likely helped the AUD today.
China/HK equities have also tracked higher to the break, another marginal positive. US equity futures hold lower at this stage.
Looking ahead, we have US data in terms of the Richmond Fed survey, while the BoE's Bailey will also speak. We also hear from the ECB's Lagarde.
Asian markets are mostly lower today, largely just a continuation from overnight on Wall street. US tsys yields are reversing earlier gains, there is uncertainty in Japan surrounding the upcoming general election and weak domestic demand have also weighed on the local market. It is a quiet week for economic data in the region this week
China & Hong Kong equities are little changed today, Ping An Insurance's reported strong quarterly earnings, while Chinese electric-vehicle makers saw a rise in their shares after surpassing sales estimates for the week starting Oct. 7, with sales showing a 62% w/w growth, significantly stronger than initial forecasts.
Short selling of HK listed equities hit its lowest in three and a half years, thanks to a rally triggered by a series of Chinese stimulus measures. Short positions made up only 9.7% of total turnover on Friday, a level not seen since April 2021, although it edged slightly higher to 10.7% on Monday.
Asian Tech stocks are struggling today, with Samsung (-1.30%), TSMC (-1.40%), Tokyo Electron (-2.50%) which has weighed on teh tech heavy KOSPI (-1%) & TAIEX (-0.60%). Foreign investors have returned to selling South Korean stocks with $144m of outflows so far today, with majority coming from tech stocks, although there has been buying of Financial stocks.
Australian equities are the worst performing in the region today, with all sectors in the red. There doesn't seem to be much of a catalyst for the underperformance, other than caution heading into the US election, investors looking to book profit after the ASX200 recently made new all time highs. Today the ASX200 is trading 1.60% lower.
Taiwan continues to benefit following strong results from TSMC. India has now marked 14 straight session's of selling by foreign investors.
South Korea: Recorded inflows of +$128m yesterday, bringing the 5-day total to -$926m. YTD flows remain positive at +$8.90b. The 5-day average is -$185m, similar to the 20-day average of -$183m and worse than the 100-day average of -$64m.
Taiwan: Saw strong inflows of +$758m yesterday, with +$2.27b over the past 5 days. YTD flows remain deeply negative at -$10.26b. The 5-day average is +$455m, better than the 20-day average of +$254m and the 100-day average of -$160m.
India: Experienced outflows of -$612m yesterday, with a total of -$2.39b over the past 5 days. YTD inflows stand at +$1.93b. The 5-day average is -$478m, worse than both the 20-day average of -$350m and the 100-day average of +$45m.
Indonesia: Posted inflows of +$21m yesterday, bringing the 5-day total to +$118m. YTD flows remain positive at +$2.94b. The 5-day average is +$24m, better than the 20-day average of -$41m and slightly lower than the 100-day average of +$32m.
Thailand: Recorded outflows of -$21m yesterday, with -$50m over the past 5 days. YTD flows are negative at -$3.15b. The 5-day average is -$10m, better than the 20-day average of -$31m and similar to the 100-day average of -$12m.
Malaysia: Saw inflows of +$9m yesterday, contributing to a 5-day inflow of +$118m. YTD flows stand at +$662m. The 5-day average is +$24m, better than the 20-day average of -$15m and in line with the 100-day average of +$6m.
Philippines: Reported minor inflows of +$3m yesterday, with net inflows of +$31m over the past 5 days. YTD flows are +$100m. The 5-day average is +$6m, slightly lower than the 20-day average of +$12m and in line with the 100-day average of +$4m.
Ahead of next month’s US Presidential Election, US officials arrived in the Middle East hoping to secure a cease fire in the war
Secretary of State Antony Blinken will visit Israel whilst US envoy Amos Hochstein headed to Beirut.
The Head of the International Energy Agency Fatih Birol told BBG TV in Singapore on Monday that “If we don’t see a major escalation of the situation in the Middle East, I still expect that oil prices will be further under pressure because we are entering a period, including next year, of more comfortable markets.”
Brent’s prompt spread — the difference between its two nearest contracts — has narrowed in recent weeks, suggesting physical conditions are becoming less tight. The differential was 35 cents a barrel in backwardation, compared with 69 cents about a month ago.
WTI had traded up through US$71/bbl during yesterday's trading session and gave back earlier gains later to be at $70.43.
Brent followed a similar trend trading up through US$74.50/bbl and is down at $74.08 this morning.
Middle East tensions continue to simmer following a drone attack on Israeli PM Benajmin Netanyahu’s home which was followed swiftly by attacks on Hezbollah strongholds in Lebanon.
Also, in Singapore the CEO of Saudi Aramco spoke as news that China banks were cutting lending rates to support the economy saying he was bullish on consumption patterns in China as ongoing stimulus measures begin to impact the world’s largest oil importer.
Gold is 0.3% higher in today’s Asia-Pac session, after closing steady on Monday, having risen to a fresh record high of $2,740.6 earlier in the session.
There was no obvious headline for the pullback from the highs, as higher Treasury yields and the bid in the dollar started to reassert themselves.
There was little reaction to MN Fed Kashkari town hall event, where he said rates will surge if the US deficit "goes to the moon". Meanwhile, Kansas City Federal Reserve President Jeff Schmid said Monday aftermarket that he prefers the central bank scale back rate cuts to more modest adjustments. Hence, there is time to observe the economy’s reaction and to assess the neutral rate, which is likely "well above" what it was in the decade before the pandemic.
Lower rates are typically positive for gold, which doesn’t pay interest.
According to MNI’s technicals team, technicals remain bullish, with sights on $2,767.1 next, the 3.236 projection of the Jul 25 - Aug 2 - Aug 5 price swing.
China September data on FX settlements showed a return to surplus, with $48.2bn, up from the deficit of -$1.2bn in the prior month. For September, banks bought $238bn of foreign currency, and sold a total $190bn on behalf of clients (resulting in the above surplus).
This was the strongest surplus since the last month of 2020. Positive or surplus settlements months, or at least trending in that direction, typically coincide with firmer backdrops for the yuan.
The yuan had already been tracking stronger through August, while settlement activity may have picked up in the second half of Sep as we approach the 7.00 handle.
Stimulus hopes, coupled with Fed easing expectations, weighed on USD/CNY, although some of these trends have obviously stabilized/reversed somewhat in Oct to date.
The FX regulator from SAFE who also spoke as this data cross, the broader backdrop for the yuan and the BOP is basically stable.
South Korea’s Producer Price Index rose +1.0% for September.
This represents a material decline from August’s rise of +1.6% and MoM saw a decline of -0.2%.
For the month, the key positive contributor came from Agriculture/Forestry and Marine which rose +3.8% whilst manufactured products decline -0.7%.
This will be watched closely by the Bank of Korea who cut rates in their last meeting a week ago.
With their next meeting not until the end of November, they will be watching Prices closely to see if they need to cut rates again or whether they are staring at deflation.
Spot USD/KRW last tracked near 1380, slightly weaker in won terms for the session. Earlier highs crested 1382.85, which was sub intra-session highs from Monday trade, 1384.5.
Headlines have crossed from EDaily (via BBG) that the authorities are closely monitoring the FX market.
As we noted in our morning KRW update, we might not be too far away from a point where the authorities start to push back against won weakness.
Spot USD/KRW is getting into the zone of 1380/1400 which marked earlier YTD highs. The slump in the won since the start of the month is also approaching 5% (assuming current levels hold into month end). This would be the largest monthly drop since early 2023, see the chart below.
China Tries New Tack to Spur Economic Growth Through Stimulus Effort (source: CAIXIN)
China has unveiled new rules governing the export of items that can be used for either civilian or military purposes, as tech rivalry with the United States increases amid allegations that Chinese exports are being used for military purposes (source: CAIXIN).
China equity markets bucking regional trends as news emerges of companies tapping the newly created government swap facility to support equity investments. Shanghai comp up +0.53% whilst bonds were unchanged.
Aggregate demand is poised to shrug off the temporary slowdown in momentum in the second quarter of FY25, as festival demand picks up pace and consumer confidence improves, the Reserve Bank of India's (RBI) October bulletin said (source: BBG).
The Indian rupee, which fell past 84 to the dollar to hit a new record low this month, is on a downward path as geopolitical risks boost oil prices and as money flows out of local stocks amid a shift toward China (source: BBG).
India’s Nifty 50 weak today down -0.35% whilst bonds were unchanged.
2yr 6.664% 5yr 6.737% 10yr 6.835% 30yr 6.975%
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
22/10/2024
0600/0700
***
GB
Public Sector Finances
22/10/2024
0900/1000
*
GB
Index Linked Gilt Outright Auction Result
22/10/2024
1230/0830
*
CA
Industrial Product and Raw Material Price Index
22/10/2024
1230/0830
**
US
Philadelphia Fed Nonmanufacturing Index
22/10/2024
1255/0855
**
US
Redbook Retail Sales Index
22/10/2024
1325/1425
GB
BOE's Bailey address at Bloomberg Global Regulatory Forum
22/10/2024
1345/1445
GB
BOE's Greene fireside chat with Josh Lipsky
22/10/2024
1400/1000
**
US
Richmond Fed Survey
22/10/2024
1400/1600
EU
ECB's Lagarde in conversation with Francine Lacqua
22/10/2024
1500/1700
EU
ECB's Lane in fireside chat at Seminar of Bank of New York
22/10/2024
1530/1130
*
US
US Treasury Auction Result for Cash Management Bill
22/10/2024
1915/2115
EU
ECB's Lagarde in panel discussion on cross border payments
22/10/2024
2000/2200
EU
ECB's Lane at Columbia University seminar
22/10/2024
2015/2115
GB
BOE's Breeden panellist at G20 cross-border payments event
23/10/2024
0900/1000
**
GB
Gilt Outright Auction Result
23/10/2024
1100/0700
**
US
MBA Weekly Applications Index
23/10/2024
-
EU
ECB's Lagarde and Cipollone in G20 FMs and CB Governors meeting
23/10/2024
1300/1400
GB
BOE's Breeden panellist at IIF meeting
23/10/2024
1300/0900
US
Fed Governor Michelle Bowman
23/10/2024
1345/0945
CA
BOC Monetary Policy Report
23/10/2024
1345/0945
***
CA
Bank of Canada Policy Decision
Keep reading...Show less
We are facing technical issues, please contact our team.
ok
Your request was sent sucessfully! Our team will contact you soon.
GB
CA
US
EU