US TSYS: Treasury Futures Grind Lower Ahead Of Busy Day Of Fed Speak

• Jun'24 10Y have continued to grind lower all throughout the Asian session, with China, Hong Kong and Taiwan out, volumes have been on the low side, futures opened the session at 109-29+, and now trades near intraday lows at 109-24.
• Cash Treasury curve has bear-steepened throughout the day with the 2Y yield now +0.6bp 4.679%, 10Y +1.8bp to 4.365%, while the 2y10y +0.781 at -31.937.
• Elsewhere in the region, ACGBs yields were 2-4.5bps higher. NZGBs flattened with yields 2bps higher to 0.5bp lower, while JGBS saw a positive 30y auction with the curve largely unchanged.
• Looking Ahead: Weekly Jobless Claims and Trade Balance will be followed by a heavy spate of Fed speakers: Philly Fed Harker, Richmond Fed Barkin, Chicago Fed Goolsbee, Cleveland Fed Mester, MN Fed Kashkari, StL Fed Musalem and Fed Gov Kugler expected to weigh in on the economy.

JGBS: Futures Cheaper & At Lows Despite Increased Demand Seen At 30Y Auction

JGB futures are weaker and at Tokyo session lows, -10 compared to settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Weekly International Investment Flow data.
• Regional and cooperative shinkin banks will find policy normalisation far more challenging than their larger peers due to the mismatch of interest paid on deposits compared to that received via their typically longer-dated fixed-income investments, raising concern among Bank of Japan officials, MNI understands. (See MNI Policy MainWire).
• Cash JGBs are slightly richer but movements are slight across benchmarks out to the 10-year. The benchmark 10-year yield is 0.3bp lower at 0.750% versus the YTD high of 0.801%.
• The 30-year yield is 1.4bp lower at 1.838% after today’s supply. 30-year supply saw mixed demand metrics. The low price failed to meet dealer expectations, but the cover ratio increased to 3.467x from 2.934x in March. It was also noteworthy that the auction tail narrowed.
• Like Tuesday's 10-year supply, albeit with less subtlety, today's auction sets a positive tone for a market that had been under pressure since mid-December due to anticipated policy tightening by the BoJ.
• Swaps are slightly mixed, with swap spreads wider across maturities.
• Tomorrow, the local calendar sees Household Spending data and Leading & Coincident Indices.

AUSSIE BONDS: Cheaper & At Lows Ahead Of Fed Speak Later Today, US NFP on Friday

ACGBs (YM -4.0 & XM -4.0) sit weaker and at Sydney session lows. In the absence of market-moving data, local participants have been content to track US tsys ahead of tonight’s US data and Fed speak, and tomorrow’s US Non-Farm Payrolls.

• Cash US tsys are dealing flat to 2bps cheaper in today’s Asia-Pac session. Later today the US calendar sees Weekly Jobless Claims and Trade Balance data alongside a heavy spate of Fed speakers.
• (Bloomberg) Australian apartment approvals tumbled to a 12-year low in February as capacity constraints and rising costs weighed on construction. (See link)
• (Bloomberg) -- Iron ore fell further toward a 10-month low on increasing shipments from top exporter Australia and faltering steel demand in China, the world’s largest consumer. (See link)
• Cash ACGBs are 3-4bps cheaper, with the AU-US 10-year yield differential 2bps higher at -19bps.
• Swap rates are 3bps higher.
• The bills strip is cheaper, with pricing -1 to -3.
• RBA-dated OIS pricing is flat to 2bps softer across meetings. A cumulative 31bps of easing is priced by year-end.
• Tomorrow, the local calendar will see Trade Balance data for February alongside AOFM's planned sale of A$800mn of 2.5% May 2030 bond.

AUSTRALIA DATA: Apartments & Queensland Drive Building Approval Weakness

Total February building approvals fell 1.9% m/m to be down 5.8% y/y, weaker than expected, following the downwardly revised 2.5% m/m in January. The disappointment was driven by the apartment sector which saw the number of approvals fall 24.9% m/m and 17.9% y/y. The weakness was not broad based, as Queensland was the only state to record a decline in the total. Private houses recovered from their 9.9% drop in January with a 10.7% jump in February but they are still down 1.3% y/y. 3-month momentum is very negative due to both main components falling. With vacancy rates extremely low and population growth strong, the number of approvals standing 17% below the Q4 2019 level remains a significant problem for policy makers.

Australia number of building approvals

Source: MNI - Market News/ABS

NZGBS: Subdued Session Ahead Of Fed Speak Later Today & NFP Tomorrow

NZGBs closed 1-2bps cheaper across benchmarks after dealing in relatively narrow ranges. Today’s domestic data drop (CoreLogic House Prices, Home Building Approvals and ANZ Commodity Prices) failed to be market moving, as expected.

• NZ's Commodity Export Prices fell 1.3% m/m in March versus a revised +3.6% in February. Dairy prices fell 4.3% m/m.
• The weekly bond auction scheduled for today was cancelled due to yesterday’s issuance of the new May-35 bond.
• Cash US tsys are dealing flat to 2bps cheaper in today’s Asia-Pac session.
• Later today the US calendar sees Weekly Jobless Claims and Trade Balance data alongside a heavy spate of Fed speakers: Philly Fed Harker, Richmond Fed Barkin, Chicago Fed Goolsbee, Cleveland Fed Mester, MN Fed Kashkari, StL Fed Musalem and Fed Gov Kugler. US Non-Farm Payrolls data is due on Friday.
• Swap rates are 2-3bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is little changed. A cumulative 69bps of easing is priced by year-end.
• Tomorrow, the local calendar is empty.

FOREX: Risk Sensitive Currencies Benefit From Softer US$ As Equities Rally

The USD is 0.1% lower again during APAC trading after weakening 0.4% on Wednesday after a softer ISM services print and Fed Chair Powell saying rates will be cut sometime this year. Equities have also rallied across the region which has supported risk-sensitive currencies such as AUD, NZD and NOK.

• After rising 0.7% on Wednesday, AUDUSD is up another 0.3% today to 0.6586, close to the intraday high. It has looked through softer iron ore prices and contracting building approval data.
• NZDUSD is up 0.3% to 0.6028 and so AUDNZD is flat at 1.0925. The cross reached a high of 1.0929 earlier but has spent most of the session range trading.
• USDJPY is little changed today at 151.69 as there hasn’t been any data or comments warning about speculation in the yen.
• USDNOK is down 0.3% to 10.699 while EURUSD is up 0.1% to 1.0844. GBPUSD is steady at 1.2654.
• Moves in Asia have been muted with China, HK and Taiwan closed. USDMYR saw the largest shift falling 0.3% to 4.74. The baht is also stronger against the dollar by 0.1% at 36.66. After BI intervention earlier in the week USDIDR is down 0.1% to 15895, which is around Tuesday’s low.

EQUITIES: Asian Equities Head Higher After Powell Rate Cut Comments

Regional Asian equities are higher today, largely on the back of comments from Jermone Powell reaffirming his view of rates cuts later this year, he mentioned the Fed would take a wait-and-see approach before reducing borrowing costs. However, his views that recent inflation figures did not “materially change” the overall picture offered support for risk assets. Elsewhere China & Taiwan will be out for the rest of the week, while Hong Kong is out today. Japan is the top performing market in the region today, while South Korean equities saw their first net outflow by foreign investors in 10 trading sessions on Wednesday and Philippines revised 2023 GDP growth to 5.5% from 6% and cut the 2024 GDP growth rate to 6-7%.

• In Japan equities have surged higher on Thursday as comments from Powell where he reaffirmed his view that the Fed will start to cut rates later this year, while yields were lower on the back of weaker than expected US ISM data. It is a quiet day for economic data for Japan, while there was a 30y JGB auction which saw mixed demand metrics The Topix Bank Index leads the way higher today, up 1.89% and up 4.10% from the lows from yesterday morning, the wider Topix Index is up 1.43%, while the Nikkei 225 is back above the 40,000 mark and up 1.57%.
• South Korean equities are higher led by chip stocks after comments from Powell. Samsung, SK Hynix and LG Energy are the biggest individual contributors to the gains in the Kospi. Wednesday marked the first day in 10 trading session where foreign investors sold SK equities, although just $28m. Shortly, South Korean Finance Minister will meet with foreign investors to promote the "Value-up" program. Currently the Kospi is up 1.10%.
• Taiwanese equities markets will be closed for the rest of the week for Tomb Sweeping Day.
• Australian equities opened higher and have since traded in a very tight trading range, the ASX200 bounced off the 20-day EMA and now trade up 0.50%. Earlier, Judo Bank PMI composite was 53.3 vs 52.4 prior, services PMI was 54.4 vs 53.5 prior, while Building Approvals dropped to -1.9% vs 3.0% expected, although slightly above the revised -2.5% from Jan. Financial are leading the way higher today, while Consumer Staples/Discretionary and Telecom names are underperforming.
• Elsewhere in SEA, New Zealand equities are 0.25% lower, while building permits increased to 14.9% in Feb from -806% in Jan, the ANZ Commodity Price Index fell to -1.3% from 3.5%. Singapore equities are 0.65% higher, Malaysian equities are 0.93% higher, Indonesian equities are up 0.90% while the IDR hovers near four year lows, Philippines equities are lower today down 0.43% after cutting 2024 GDP growth to 6%-7% from 6.5%-7.5%

OIL: Oil Prices Keep Rising As Fed’s Powell Signals Rate Cuts & OPEC Keeps Cuts

Oil prices have continued their move higher during APAC trading today. Brent is 0.4% higher at $89.69/bbl, close to the intraday high and is approaching the psychologically-important $90 level again. WTI is up 0.4% to $85.77. Oil has strengthened following Fed Chair Powell saying rates will be cut this year and OPEC’s decision to maintain production cuts until at least the end of June. Prices are up around 3% this week. The USD index is slightly lower.

• At its online ministerial review meeting, OPEC members didn’t suggest any changes to current quotas to the end of June. But compliance is patchy with Iraq, UAE and Gabon producing above their quotas, although Iraq moved closer cutting output 30kbd in March, according to a Bloomberg survey. Also Russian crude exports are rising.
• US central command reported it had destroyed Houthi missiles and drones off the coast of Yemen which were directed at USS Gravely.
• Later the Fed’s Harker, Barkin, Goolsbee, Mester and Kashkari appear. In data terms February US trade and jobless claims, and European March services PMIs print. The ECB March accounts are also published.

GOLD: Winning Steak Extends To Seven

Gold is little changed in the Asia-Pac session, after closing 0.8% higher at $2300.00 on Wednesday, a new record high. Bullion’s winning streak extended to seven sessions.

• Investors took comfort in comments from Fed Chairman Powell. He said the Fed is likely to begin cutting interest rates “at some point this year”, but the risks are two-sided as inflation could remain stubborn and the economy could deteriorate.
• Earlier, a stronger-than-expected US ADP Jobs Report (+184k vs. +150k est) initially pushed US yields higher, before soft ISM Services data reversed the move.
• The US 2-year yield peaked near 4.74%, before reversing lower to 4.67%. The 10-year yield saw a fresh YTD high (4.43%), before retracing to 3.35%.
• According to MNI’s technicals team, the trend condition in gold remains bullish. Key trend support has been defined at $2146.2, the Mar 18 low.
• (AFR) Bitcoin enthusiasts often argue that one of the digital currency’s many virtues is its ability to act as a safe haven asset, fulfilling the role that gold has traditionally played. (See link)

INDONESIA: Indonesian Sov Curve Slightly Steeper, IDR Hovers Near 4 year Low

Indonesian USD sovereign debt curve is largely unchanged today, yields are flat to 1bp higher. There has been very little in the way of market headlines or eco data out in the region. Indonesian Equities and Bonds continue to see foreign investors sell, as investors grow wary of the expansive spending expected by President Elect Prabowo. The IDR is just off recent lows however with outflows continuing the past few days in both bonds and equities further weakness may be in sight.

• The INDON sov curve is a touch steeper on Thursday, the 2Y yield is down 1bp to 4.97%, 5Y yield is unchanged at 4.95%, the 10Y yield is unchanged at 5.095%, while the 5-year CDS is also unchanged at 75.5bps
• The INDON to UST spread is a touch wider, as US yields were lower on Wednesday, the 2yr is 30bps (+2bps), 5yr is 61bps (+1bp), while the 10yr is 73.5bps (-1bps).
• In cross-asset moves, the USD/IDR is 0.11% lower, the JCI is 0.95% higher, Palm Oil is 0.43% lower, while US Tsys curves are largely unchanged for the day with yields flat to 2bps higher.
• Looking ahead: March Foreign Reserves are due out on Friday