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EURGBP extends its decline

EMERGING MARKETS

CEEMEA FX Price Signal Summary: USDRUB Weakness Accelerates

BONDS

EGB/Gilts - Holding onto gains

EXECUTIVE SUMMARY

  • FED'S HARKER: INFLATION WON'T BE POSING A THREAT ANYTIME SOON (CNBC)
  • FED'S BARKIN SEES REBOUND AHEAD, EVEN IF NO HERD IMMUNITY (RTRS)
  • ITALY'S 5-STAR VOTES TO BACK DRAGHI, OPENING WAY FOR NEW GOVERNMENT (RTRS)
  • BRITAIN, EU STRESS COMMITMENT TO SOLVE NORTHERN IRELAND BORDER ROW (RTRS)
  • NEXT PHASE OF UK VACCINE ROLLOUT 'MAY NOT MEET THE PUBLIC'S EXPECTATIONS', GROUP OF MPS WARN (SKY)
  • BBC WORLD NEWS BLOCKED IN CHINA FOLLOWING CGTN BAN IN UK (BBG)

Fig. 1: U.S. 5-Year & 10-Year Real Yields (%)

Source: MNI - Market News/Bloomberg


UK

CORONAVIRUS: A lack of planning could affect the next phase of the coronavirus vaccine rollout, MPs have warned. The Commons Public Accounts Committee (PAC) praised the "world-beating" effort to get the jab to the most vulnerable, but said there is "much to be done" if the UK government is to hit its next target. Ministers are aiming to offer a jab to about 15 million people in the top four priority groups by 15 February, then a further 17.7 million people in the next five groups - including all over-50s - by the end of April. (Sky)

CORONAVIRUS: Ministers will discuss a Cabinet Office proposal to introduce vaccine and testing certificates for when international travel is allowed again, Sky News can reveal. Responsibilities have already been divided up between government departments to look at the idea. If approved, the Department for Transport will be told to draw up plans for a certificate infrastructure. (Sky)

CORONAVIRUS: Social distancing restrictions will have to remain in place until at least the autumn to reduce the transmission of coronavirus under plans being considered by ministers. The Times understands that the government's route out of lockdown is based on the assumption that people will have to wear facemasks and remain a metre apart for months. Scientists believe that the restrictions may need to be retained until the end of the year. (The Times)

CORONAVIRUS: Boris Johnson has been told by Tory MPs that reopening schools on March 8 must be "signed in blood, not a line in the sand" amid fears that date could be pushed back. (Telegraph)

CORONAVIRUS: Teachers and police are expected to be given priority for vaccines once the over-50s have been offered Covid jabs, The Telegraph can disclose. Britain is on course to hit targets to offer all those in the top four priority groups – including everyone over the age of 70 – their first dose of the vaccine by Monday. But research suggests that hospital pressures will not ease significantly until the end of March, once all over 60s and younger people with health problems have had their first jab. (Telegraph)

CORONAVIRUS: A new booking system for England's hotel quarantine scheme was taken offline minutes after it launched. The portal, set up as part of efforts to control new Covid variants entering the country, is "undergoing work to correct a minor technical issue". The Department of Health said the portal would be open "well before" the scheme comes into effect on Monday. Officials are expecting to have the website back up and running by 10:00 GMT on Friday, the BBC has been told. (BBC)

FISCAL: The Treasury is considering freezing personal income tax allowances in next month's Budget in a "stealth" tax raid that could bring in up to £6 billion, The Telegraph can disclose. (Telegraph)

BREXIT: Britain and the European Union on Thursday reiterated their commitment to resolve post-Brexit trade frictions over the Northern Ireland border in the wake of a row over COVID-19 vaccines. Senior British minister Michael Gove and European Commission Vice President Maros Sefcovic released a joint statement after they met on Thursday, saying they had "a frank but constructive discussion." They added they would "spare no effort" to implement solutions agreed in December under the so-called Northern Ireland Protocol, but did not provide details. (RTRS)

BREXIT: Trading in a key euro-denominated derivatives market flooded out of London last month to rival financial centres in New York, Amsterdam and Paris, in the latest evidence of the blow dealt by Brexit to the UK financial centre. The trading of euro-denominated swaps in London dropped from nearly 40 per cent of the market last July to 10 per cent in January, according to a survey published by data provider IHS Markit on Thursday. (FT)

BREXIT: The City will lift its horizons and double down on global trade if the European Union cuts off access to its financial markets, grandees and experts have said. (Telegraph)

BOE: Britain's economy will bounce back like a 'coiled spring' once liberated from lockdown, a Bank of England boss says today. In an exclusive article for the Daily Mail, chief economist Andy Haldane insists the public are 'desperate to get their lives back'. He believes a 'decisive corner has been turned' thanks to the Covid-19 vaccine rollout – and families are ready to fuel a rapid return to prosperity with a multi-billion pound spending spree. (Daily Mail)

EUROPE

ECB: Higher taxes should by the end of this year push inflation in Germany to well beyond the European Central Bank's target of below but close to 2%, Bundesbank chief Jens Weidmann said in remarks published on Friday. Weidmann, in an interview with the Augsburger Allgemeine newspaper, cited reduced value added tax (VAT) that expired at the end of last year and a tax on greenhouses gas emissions that went into effect on Jan. 1. "From today's perspective, the (EU) harmonised consumer price index in Germany should rise to above 3% until the end of the year," said Weidmann. "One thing is clear: the inflation rate will not remain as low as last year permanently." (RTRS)

FRANCE: The epidemic in France is currently at a plateau and may be declining slightly, French Health Minister Olivier Veran said at a weekly press conference. He noted that a survey of some 17,000 tests over the past four days showed that between 4% and 5% of cases are linked to the South African and Brazilian variants of the coronavirus while between 20% and 25% are from the U.K. variant. The country reported 21,063 new infections on Thursday and 360 new deaths, bringing to total to 80,803 fatalities. (BBG)

FRANCE: French Interior Minister Gerald Darmanin and nationalist leader Marine Le Pen faced off in a televised debate to start an election season culminating in President Emmanuel Macron's expected bid for a second term. While Le Pen was toughest on illegal immigration and with a call for an outright ban on the Muslim veil, the two politicians often found themselves aligned on security matters and France's unique form of secularism, known as "laicite." (BBG)

ITALY: Members of Italy's 5-Star Movement voted on Thursday to back Prime Minister designate Mario Draghi, opening the way for the former European Central Bank chief to take office at the head of a broad government of national unity. In an online ballot, 59.3% of 5-Star supporters heeded a call from party leaders to support the new administration, despite the fact it includes some of their arch foes and will be headed by the sort of technocrat they have previously decried. (RTRS)

PORTUGAL: Portugal may keep its existing confinement measures in place through the month of March as it tries to contain the spread of the coronavirus pandemic. The current restrictions will remain in place in the last two weeks of February and "we should assume" that this level of confinement will also be applied during March, Prime Minister Antonio Costa said at a press conference in Lisbon on Thursday. "It's too early to say when we'll start to gradually lift restrictions. The situation continues to be extremely serious." (BBG)

IRELAND: Ireland may be seeing the first impact of the vaccines on case numbers among health-care workers, a government adviser said. New cases among that cohort are below what would be expected given the spread of the virus in the wider community, Dr Karina Butler who advises the government on its vaccine program, told reporters in Dublin. Authorities are overall "cautiously optimistic" on the virus's spread, deputy Chief Medical Officer Ronan Glynn said, with hospitalizations now less than half the peak of mid-January. Ireland reported 866 new virus cases on Thursday, with 52 deaths. (BBG)

RATINGS: Sovereign rating reviews of note slated for after hours on Friday include:

  • Fitch on Hungary (current rating: BBB; Outlook Stable) & Norway (current rating: AAA; Outlook Stable)
  • Moody's on Ireland (current rating: A2; Outlook Stable) & Lithuania (current rating: A3; Outlook Positive)
  • S&P on Hungary (current rating: BBB; Outlook Stable), Latvia (current rating: A+; Outlook Stable), Lithuania (current rating: A+; Outlook Stable) & Sweden (current rating: AAA; Outlook Stable)
  • DBRS on Morningstar on Belgium (current rating: AA (high), Negative Trend) & Luxembourg (current rating: AAA, Stable Trend)

U.S.

FED: Philadelphia Federal Reserve President Patrick Harker said Thursday that the central bank won't have to worry about inflation getting in its way anytime soon. In a CNBC interview, Harker faced a question posed repeatedly to Fed officials in recent days over whether its easy monetary policy could stoke price pressures and interfere with what he described as "a pretty choppy economy." (CNBC)

FED: A slower-than-expected vaccine rollout and the rise of coronavirus variants may make attaining herd immunity against COVID-19 difficult, but that should not stop the economy from rebounding, according to a U.S. central banker Thursday. "I don't think the economy requires herd immunity," Richmond Federal Reserve Bank President Thomas Barkin told Reuters Thursday. "Consumers who get vaccines, who have money in their pockets...are going to be free to spend," he said. (RTRS)

FISCAL: The House Ways and Means Committee advanced legislation that would infuse households with hundreds of billions of dollars of cash through direct payments and tax credits, a key plank of President Joe Biden's Covid-19 relief package. The panel on Thursday approved measures providing $593.5 billion in benefits, most of which is made up of $1,400 stimulus payments, along with advance tax credits for children that will be sent to households on a monthly basis. The measures passed on a 24-18 party-line vote. A dozen House committees are working on different elements of Biden's $1.9 trillion rescue proposal, and Thursday's component is one of several under the jurisdiction of the Ways and Means panel. The committees plan to complete their work on Friday, with the full House voting on the overall package the week of Feb. 22. (BBG)

FISCAL: As Congress tries to help streamline Covid-19 vaccine distribution and provide more relief to jobless Americans, House Speaker Nancy Pelosi expects the next pandemic aid bill to become law within weeks. The California Democrat told reporters that she thinks Democrats' $1.9 trillion rescue package will pass before March 14, when key jobless benefits expire. The House proposal as currently structured would extend a federal unemployment supplement at $400 per week through Aug. 29, and keep programs expanding eligibility for benefits in place through the same date. Separately, Pelosi said the House bill would include a $15 per hour minimum wage. Senate Majority Leader Chuck Schumer, D-N.Y., said he is working to make sure the proposal would be allowed under a special process the Senate is using to pass the legislation with only Democratic votes. (CNBC)

FISCAL: White House: Senators meeting on infrastructure was productive. (BBG)

FISCAL: The federal budget deficit is projected to total $2.3 trillion in the 2021 fiscal year, a drop from last year but well ahead of anything the U.S. had seen prior to the Covid-19 pandemic, the Congressional Budget Office reported Thursday. That total does not include the $1.9 trillion in relief spending that President Joe Biden has proposed, because the ultimate size of the package has not been determined. (CNBC)

FISCAL: Don't count on having extra time to get your tax return filed this year like you did in 2020. The IRS said Thursday it has no plans to extend the standard filing deadline of April 15. This comes despite the agency delaying the start date for accepting returns to Friday (Feb. 12), when it usually begins doing so in late January. (CNBC)

CORONAVIRUS: The US on Thursday reported more than more than 100,000 new coronavirus cases for the first time in five days and daily deaths remained elevated, providing a pause to some encouraging downward trends that formed recently. States reported 103,024 new infections, according to Covid Tracking Project. This was the first time since Saturday that daily cases have been over 100,000, having fallen below that threshold on Sunday for the first time since the start of November. Authorities attributed a further 3,885 fatalities to coronavirus, up from 3,445 on Wednesday. (FT)

CORONAVIRUS: An increase in vaccinations in the coming weeks in itself might not be enough to contain the spread of a coronavirus variant that was first reported in the United Kingdom in December and has now appeared in the U.S, said Scott Gottlieb, former commissioner of the Food and Drug Administration. The emergence of variants could complicate efforts to reopen the economy in the U.S., which has faced at least 475,000 virus deaths, more than any other country, according to Johns Hopkins University data. (CNBC)

CORONAVIRUS: The federal government purchased an additional 200 million doses of the coronavirus vaccine, President Biden announced Thursday during a tour of the National Institutes of Health. The big picture: Biden said the U.S. is on track to have enough supply of the vaccine to inoculate 300 million Americans by the end of July. That comes out to roughly 600 million doses, boosting "supply in the United States by 50 percent," as first reported by the Washington Post. It's unlikely the purchase will make the vaccine widely available sooner than originally planned, but it may prevent shortages later this year, per the Post. (Axios)

CORONAVIRUS: The federal government began shipping 1 million doses of Covid vaccines directly to retail pharmacies across the country Thursday, as part of the Federal Retail Pharmacy Program. The plan includes major chain pharmacies and grocery stores with pharmacies, such as Walgreens, CVS Pharmacy and Rite Aid, as well as Walmart, Costco, Kroger and Publix. CVS started giving out Covid vaccines in 11 states on Thursday. Walgreens will start administering vaccines at 15 of its pharmacies on Friday. People eligible for the vaccine will need to make appointments on the corresponding pharmacy's website. In the program's early days, many pharmacies may see very limited supply, according to the CDC. (CNBC)

CORONAVIRUS: The White House has not made any final decisions on imposing domestic travel restrictions, press secretary Jen Psaki said Thursday. The comment from the White House came after a report said the administration was considering implementing one around Florida due to coronavirus cases. (The Hill)

CORONAVIRUS: Florida's governor responded to reports claiming the Biden administration was considering travel restrictions on Americans — and possibly those from his state — in an effort to curb rising cases of coronavirus variants, describing them as "unconstitutional" and "unjust". (FT)

CORONAVIRUS: Ohio Governor Mike DeWine said vaccinations of nursing-home patients have helped cut the number of hospitalized Covid-19 patients, allowing the state to lift a daily curfew in force since November. Nursing-home residents account for more than half of Ohio's deaths, which state officials revised upward to 12,577 on Thursday after what DeWine called a data reconciliation issue. (BBG)

POLITICS: Biden administration officials are weighing nominating prominent Republicans to ambassadorships — including Cindy McCain and former Republican Sen. Jeff Flake — to highlight the importance of bipartisanship in U.S. foreign policy. (Axios)

EQUITIES: Federal prosecutors are investigating whether market manipulation or other types of criminal misconduct fueled the rapid rise last month in prices of stocks such as GameStop Corp. and AMC Entertainment Holdings Inc., according to people familiar with the matter. The Justice Department's fraud section and the San Francisco U.S. attorney's office have sought information about the activity from brokers and social-media companies that were hubs for the trading frenzy, the people said. Prosecutors have subpoenaed information from brokers such as Robinhood Markets Inc., the popular online brokerage that many individual investors used to trade GameStop and other shares, the people said. (WSJ)

OTHER

U.S./CHINA: President Joe Biden warned lawmakers Thursday that China is aggressively outpacing the United States on infrastructure. "They're investing a lot of money, they're investing billions of dollars and dealing with a whole range of issues that relate to transportation, the environment and a whole range of other things," Biden said he told a bipartisan group of senators whom he met with in the Oval Office. (CNBC)

U.S./CHINA: The United States has profound concerns over China's "predatory" behavior when it comes to technology, the State Department spokesman said on Thursday, adding that the Biden administration will engage with China when in the interest of the United States. State Department spokesman Ned Price also said Washington has concerns about the Chinese Communist Party's activities, including through the Confucius Institutes. (RTRS)

U.S./CHINA: The Biden administration says it is reviewing former president Donald Trump's proposed ban of the Chinese messaging app WeChat in the US, a day after announcing a similar pause to consider the fate of the video app TikTok. In a court filing, the new administration requested a hold on legal proceedings related to Trump's efforts to ban WeChat by executive order over national security concerns. The case had been subject to an appeal hearing. (FT)

UK/CHINA: The British Broadcasting Corp.'s World News has been taken off the air in China following the U.K.'s removal of Chinese state-backed broadcaster CGTN's license last week. BBC reports on China violated regulations that news bulletins should be "truthful and fair," China's National Radio and Television Administration said in a statement early on Friday in Beijing. The U.K.'s Foreign Secretary Dominic Raab said in a Twitter post that the decision represented an "unacceptable curtailing of media freedom" and that it would damage China's reputation. "We are disappointed that the Chinese authorities have decided to take this course of action," a BBC spokeswoman said by email. "The BBC is the world's most trusted international news broadcaster and reports on stories from around the world fairly, impartially and without fear or favor." The situation escalated when Hong Kong's public broadcaster RTHK said in a statement it would suspend the relay of BBC World Service and BBC News Weekly from 11 p.m. on Friday, citing the decision by China's National Radio and Television Administration as the reason for its move. (BBG)

U.S./EUROPE: U.S. President Joe Biden will address a virtual edition of the annual Munich Security Conference on Feb. 19, the White House said on Thursday. White House press secretary Jen Psaki confirmed the address at a press briefing in Washington. (RTRS)

GEOPOLITICS: The Chinese telecoms giant Huawei is taking the bank HSBC to court in the UK as part of its attempt to prevent the extradition of its chief financial officer from Canada to the US. Meng Wanzhou was arrested in Canada on a US request over claims she misled HSBC in a 2013 meeting. Huawei now hopes to gain access to HSBC documents that could help it undermine the US case for her extradition. The bank told the BBC the application for disclosure was "without merit". (BBC)

GLOBAL TRADE: The Biden administration is working to address the global semiconductor shortage that has caused production halts in U.S. industries including autos, White House Press Secretary Jen Psaki said. The administration is identifying choke points in supply chains and discussing an immediate path forward with businesses and trading partners, Psaki told reporters at the White House on Thursday. In the longer term, policy makers are looking for a comprehensive strategy to avoid bottlenecks and other issues the semiconductor industry has been facing for years. President Joe Biden is expected to sign an executive order directing a government-wide supply chain review for critical goods in the coming weeks, with the chip shortage a central concern behind the probe. (BBG)

GLOBAL TRADE: President Joe Biden's administration is refraining from a new tariff rotation in its dispute with the European Union over illegal aid to Boeing Co. and Airbus SE, a move that could help lay the groundwork for resolving a 17-year dispute. The U.S. Trade Representative and the nation's aircraft industry decided that it's "unnecessary at this time" to revise the tariffs on $7.5 billion of EU products, according to a notice in the Federal Register published Thursday. (BBG)

CORONAVIRUS: The European Commission has so far approved all requests for the export of COVID-19 vaccines, including to Britain, the United States, China and Japan, since it set up on Jan. 30 a mechanism to monitor vaccine flows, a spokeswoman said on Thursday. The accommodating stance is expected to alleviate concerns from global partners about the EU's willingness to allow COVID-19 vaccines to leave its territory, despite the 27-nation bloc having faced supply disruptions and a cut in vaccine deliveries. The EU granted in total 37 authorizations for vaccine exports to 21 countries between Jan. 30 and Feb. 10, the spokeswoman said, without giving precise figures on the number of shots being exported from factories in the EU, citing confidentiality reasons. (RTRS)

CORONAVIRUS: Some experts have called for a strict "zero-Covid" strategy, which would impose strict lockdowns, social restrictions and travel bans in a bid to eradicate all Covid-19 cases before reopening public and business life, CNBC's Holly Ellyatt reports. Yet, the World Health Organization has said it is much too early and tricky to implement the strategy in Europe. (CNBC)

CORONAVIRUS: New data from the Centers for Disease Control and Prevention show allergic reactions to Covid-19 are rare and anaphylaxis, one type of severe reaction, occurs in 2 to 5 people for every million vaccinated in the U.S. (BBG)

JAPAN: Japanese Economy Minister Yasutoshi Nishimura told a government advisory panel on the coronavirus that it's necessary to maintain a state of emergency in place for 10 areas that include Tokyo and Osaka. Nishimura said the medical system is still under strain and the number of elderly people with infections isn't dropping. (BBG)

JAPAN: Japan's health ministry panel is expected to approve the use of Pfizer's Covid-19 vaccine on Friday, public broadcaster NHK reported citing unidentified person. The panel starts meeting at 6 pm local time and approval would pave the way for the government to officially approve the vaccine "soon," NHK said. That comes as a clinical trial in Japan of 160 patients confirmed an increase in virus-neutralizing antibodies, it said. Kyodo separately reported that the official approval by the ministry would come on Sunday, bringing forward the decision by one day. (BBG)

JAPAN: Japan's first shipment of Pfizer's coronavirus vaccine arrived in the country by airfreight on Friday, Nikkei reports, citing an unidentified person. Kyodo reported that the shipment contains more than 400,000 doses. (BBG)

JAPAN: Japan's economy is still in severe shape due to the coronavirus, but the overall trend is toward recovery, finance minister Taro Aso tells reporters Friday. (BBG)

AUSTRALIA: Australia's Victoria state will enter a snap five-day lockdown from midnight after an outbreak of the virulent U.K. strain of the coronavirus from a quarantine hotel spread. Residents must stay home except for essential shopping, care, exercise and work. Supermarkets will remain open but other retailers, gyms and entertainment venues will close. The Australian Open will continue without spectators."We must assume that there are further cases in the community than we have positive results for, and that it is moving at a velocity that has not been seen anywhere in our country over the course of these last 12 months," state Premier Daniel Andrews told reporters on Friday. (BBG)

NEW ZEALAND: New Zealand's frontline border workers will start to receive the first Covid-19 vaccinations next Saturday, Prime Minister Jacinda Ardern has revealed. From February 20, border and MIQ workers in Auckland will be offered the Pfizer/BioNTech Covid-19 vaccine. Speaking to media in Auckland this morning, Ardern said it would take roughly two to three weeks for all 12,000 frontline workers to receive the jab. (NZ Herald)

CANADA: New COVID-19 cases in Ontario, Canada's most populous province, are likely to rise again beginning in late February as a more contagious variant of the coronavirus spreads, and intensive care admissions could follow in March, a panel of experts advising the provincial government said on Thursday. (RTRS)

CANADA: MNI INTERVIEW: Canada Opposition Tolerates Deficit In Pandemic

  • Canada's new main opposition finance spokesman told MNI he can accept Prime Minister Justin Trudeau's record deficit spending for now if there's more success in tackling the Covid-19 pandemic, indicating his party will not seek to force an election - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

TURKEY: Turkey expands short-selling permit to top 50 shares from top 30 shares on the Istanbul stock exchange, according to Capital Markets Board bulletin published on Thursday. The board keeps the ban in place for other stocks. (BBG)

TURKEY/RUSSIA: In December, Washington imposed sanctions on Ankara for acquiring the S-400s on grounds they threaten its F-35 fighter jets and are incompatible with shared NATO defences. Turkey rejects this and says the systems will stand independently from NATO defences. Since Joe Biden was elected U.S. president, Ankara has said it wants better ties and again proposed an S-400 joint working group. But Washington has repeatedly rejected that and says sanctions will remain until Turkey no longer possesses the missiles. (RTRS)

MEXICO: The Bank of Mexico cut interest rates Thursday, resuming its monetary easing cycle after two meetings on hold. The central bank's five-member board of governors voted unanimously in favor of reducing the overnight interest-rate target by a quarter of a percentage point to 4%, its lowest level since June of 2016. The bank had interrupted a series of 11 consecutive interest-rate cuts in November after inflation moved above its 2%-4% target range, and stayed on hold again in December saying it wanted to confirm that inflation was moving back toward its specific 3% target

BRAZIL: Brazil will extend pandemic emergency cash transfers to the poor and vulnerable, Economy Minister Paulo Guedes said on Thursday, but added that the payments must come with compensating cost-cutting measures to avoid ruin to the public finances. Addressing an online event hosted by the National Agriculture Society, Guedes said the aid must be included in an emergency 'war budget' like last year, meaning the government's spending cap and 'golden rule' on borrowing would not be broken. Last year's emergency measures to cushion the impact of the COVID-19 pandemic cost the government around 8% of gross domestic product. More than half of that, some 322 billion reais ($60 billion), went on direct transfers to the poor. "I need a war PEC (constitutional amendment), I need congressional action," Guedes said, noting that last year's emergency constitutional amendment was put together in 48 hours. (RTRS)

SOUTH AFRICA: South Africa has secured millions of doses of Johnson & Johnson and Pfizer Inc vaccines to fight the highly infectious COVID-19 variant that is dominant in the country, President Cyril Ramaphosa said on Thursday. During a televised annual state of the nation address, Ramaphosa said South Africa had secured 9 million doses of the J&J vaccine, with 500,000 expected to arrive over the next four weeks so authorities can start inoculating health workers. Another 20 million doses of the vaccine from Pfizer and BioNTech were also on their way, he said. (RTRS)

IMF: Group of Seven finance ministers are likely to back a new allocation of the International Monetary Fund's own currency, or special drawing rights, at an online meeting on Friday to help low-income countries, sources said. A new issuance is similar to when a central bank prints money as the new SDRs give each IMF member more reserves to draw on in proportion to their shareholding in the Fund. Officials from the United States, the IMF's biggest shareholder, have signalled they are open to a new issuance of $500 billion, sources said - a clear shift in position under the administration of new U.S. President Joe Biden. (RTRS)

OVERNIGHT DATA

NEW ZEALAND JAN BUSINESSNZ M'FING PMI 57.5; DEC 48.3

New Zealand's manufacturing sector started the year with expansion, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for January was 57.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up 9.2 points from December, and a solid return to expansion. BusinessNZ's executive director for manufacturing Catherine Beard said that the January result was a welcome start to 2021, with the result clearly above the long term average of 53.0 for the Index. "All major sub-index values were up from December, with New Orders (62.4) leading the way with its highest result since July last year. Production (59.1) rose 6.8 points, while Employment (55.4) produced its highest result since August 2017." BNZ Senior Economist, Craig Ebert said that "the 3-month average to January was 53.6, slightly above the long-term norm of 53.0. Also, January's improvement was encouraging in its composition, with New Orders leading the way". (BNZ)

NEW ZEALAND JAN FOOD PRICE INDEX +1.3% M/M; DEC +0.1%

MARKETS

SNAPSHOT: No Bullish Start For The Year Of The Ox

Below gives key levels of markets in the second half of the Asia-Pac session:

  • Nikkei 225 down 81.79 points at 29480.57
  • ASX 200 down 45.711 points at 6804.4
  • Shanghai Comp. is closed
  • JGB 10-Yr future up 17 ticks at 151.67, yield down 1.8bp at 0.065%
  • Aussie 10-Yr future down 3.5 ticks at 98.775, yield up 3.2bp at 1.218%
  • U.S. 10-Yr future unch. at 136-27+, yield down 0.67bp at 1.157%
  • WTI crude down $0.43 at $57.81, Gold down $3.38 at $1821.82
  • USD/JPY up 5 pips at Y104.81
  • FED'S HARKER: INFLATION WON'T BE POSING A THREAT ANYTIME SOON (CNBC)
  • FED'S BARKIN SEES REBOUND AHEAD, EVEN IF NO HERD IMMUNITY (RTRS)
  • ITALY'S 5-STAR VOTES TO BACK DRAGHI, OPENING WAY FOR NEW GOVERNMENT (RTRS)
  • BRITAIN, EU STRESS COMMITMENT TO SOLVE NORTHERN IRELAND BORDER ROW (RTRS)
  • NEXT PHASE OF UK VACCINE ROLLOUT 'MAY NOT MEET THE PUBLIC'S EXPECTATIONS', GROUP OF MPS WARN (SKY)
  • BBC WORLD NEWS BLOCKED IN CHINA FOLLOWING CGTN BAN IN UK (BBG)

BOND SUMMARY: Mixed Core FI Trade In Asia

Little to flag for the U.S. Tsy space in Asia-Pac hours, with a very light bid creeping in as e-minis ticked lower. T-Notes last +0-00+ at 136-28, within a 0-03+ range, aided by a couple of lifts in TYH1 (as we have flagged). Light bull flattening has been seen in the cash space, with 30s sitting ~1.0bp richer on the day. There has been little in the way of notable headline flow, although the Australian state of Victoria has gone into a 5-day circuit breaker lockdown after < 20 COVID cases became apparent in the state, while there are questions re: the appropriateness of planning surrounding the next stage of the UK's COVID vaccine drive. Domestically, the latest U.S. daily new COVID case count rose back above 100K for the first time this week. None of these headlines are deemed to be gamechangers, but are incrementally negative.

  • JGB futures oscillate around the closing levels posted at the end of the pre-holiday overnight session, last +17, with the 5-10 Year zone of the curve outperforming, firming by ~2.0bp, while the super-long end lagged. Economy Minister Nishimura stressed that it is necessary for the state of emergency to be maintained across 10 areas of Japan, as was flagged earlier. Elsewhere, Finance Minister Aso reiterated the broader policymaker view re: the Japanese economy.
  • YM -0.5, XM -2.5 in Sydney, while cash ACGBs sit steeper and swaps narrow vs. ACGBs across most of the curve. The space continues to look through local COVID matters, with some SSA issuance pricing seen. The AOFM's weekly issuance schedule provided another atypical round of issuance, with a wider spread of maturities set to be offered over 3 auctions next week (see earlier bullet for details).

JGBS AUCTION: Japanese MOF sells Y5.4626tn 3-Month Bills:

The Japanese Ministry of Finance (MOF) sells Y5.4626tn 3-Month Bills:
  • Average Yield -0.0979% (prev. -0.0942%)
  • Average 100.0263 (prev. 100.0253)
  • High Yield: -0.0949% (prev. -0.0912%)
  • Low Price 100.0255 (prev. 100.0245)
  • % Allotted At High Yield: 25.8983% (prev. 30.2901%)
  • Bid/Cover: 3.697x (prev. 3.734x)

AUSSIE BONDS: The AOFM sells A$1.0bn of the 3.25% 21 Apr '29 Bond, issue #TB138:

The Australian Office of Financial Management (AOFM) sells A$1.0bn of the 3.25% 21 April 2029 Bond, issue #TB138:
  • Average Yield: 0.9258% (prev. 0.8450%)
  • High Yield: 0.9275% (prev. 0.8450%)
  • Bid/Cover: 4.7750x (prev. 3.3325x)
  • Amount allotted at highest accepted yield as percentage of amount bid at that yield 47.8% (prev. 92.0%)
  • bidders 32 (prev. 35), successful 12 (prev. 3), allocated in full 4 (prev. 0)

AUSSIE BONDS: AOFM Weekly Issuance Slate

The AOFM has released its weekly issuance schedule:

  • On Monday 15 February it plans to sell A$400mn of the 2.75% 21 May 2041 Bond.
  • On Wednesday 17 February it plans to sell A$1.5bn of the 1.00% 21 December 2030 Bond.
  • On Thursday 18 February it plans to sell A$500mn of the 25 June 2021 Note & A$500mn of the 27 August 2021 Note.
  • On Friday 19 February it plans to sell A$600mn of the 0.25% 21 November 2025 Bond.

EQUITIES: Negative Day

Volumes remain thin in the Asia time zone with many participants observing LNY, those markets that are open trade in the red. Japan return after a holiday yesterday, the Nikkei 225 opened higher but has lost ground as the session wore on. The ASX 200 is also lower, weighed on by the announcement of a five-day lockdown in Victoria after a cluster of cases and losses across the commodity complex.

  • In the US the S&P 500 closed in minor positive territory yesterday, futures are slightly lower in Asia today as negative sentiment prevails, US markets are closed on Monday for President's Day.

OIL: Profit Taking Seen After Rally

Crude futures are heading into Europe on a negative note on Friday; WTI is down around $0.41 at $57.84 while brent is down $0.38 at $60.76. If the benchmarks end on in the red, it will be the second consecutive day of losses after eight sessions of gains.

  • Uncertainty over future demand is putting downward pressure on oil, the IEA reduced its 2021 global demand forecast by 200k bpd. This is the fourth straight month the IEA has lowered its demand outlook, citing the challenges the world is having in reining in COVID-19. It also increased estimates for non-OPEC supply by 400k bpd.
  • OPEC's outlook, released shortly after the IEA's, painted a different picture. The group raised its estimate of 2021 global oil demand from last month, saying growth in the second half of 2021 will be supported by massive stimulus programs.

GOLD: Softer, But Rangebound

Gold has moved lower over the last 24 hours or so, with a modest uptick in the DXY and nudge higher in longer dated U.S. real yields seen, but remains confined to the recent range after the 50-day EMA capped on Wednesday. Spot last deals $4/oz or so softer, just above $1,820/oz.

FOREX: Caution Creeps In, Asia Celebrates LNY

A sense of caution crept into G10 FX space in holiday-thinned trade, with macro flow subdued owing to a number of market closures across Asia. Crude oil prices softened a tad, applying a modicum of pressure to commodity-tied FX & pushing NOK to the bottom of the pile. AUD slipped as Victoria entered a five-day snap lockdown.

  • GBP traded on a weaker footing amid resurfacing concerns over the ramifications of Brexit and a broader risk-off feel.
  • DXY edged higher as the greenback outperformed its peers from the G10 basket. USD/JPY held a tight range and last trades at Y104.79, with $3.6bn worth of options with strikes at Y104.85-105.00 due to expire at the NY cut.
  • Today's economic docket features flash quarterly GDP report & monthly economic indicators out of the UK, flash U.S. U. of Mich. Survey and Norwegian GDP.

FOREX OPTIONS: Expiries for Feb12 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.2000-05(E1.0bln), $1.2040-50(E550mln), $1.2060-70(E751mln), $1.2095-00(E573mln), $1.2110-25(E1.3bln), $1.2165-80(E1.8bln), $1.2195-10(E899mln), $1.2250-55(E538mln)
  • USD/JPY: Y103.00-05($737mln), Y103.50-60($1.3bln), Y103.85-90($768mln), Y104.00-20($1.6bln), Y104.50($512mln), Y104.85-105.00($3.7bln), Y105.25-35($840mln), Y105.40-50($655mln), Y106.00-10($2.1bln), Y106.30-35($1.0bln)
  • GBP/USD: $1.3850(Gbp1.0bln-GBP puts)
  • EUR/GBP: Gbp0.8700(E607mln-EUR puts)
  • AUD/USD: $0.7620-30(A$1.1bln), $0.7700-10(A$1.1bln), $0.7720-35(A$1.4bln), $0.7750-70(A$955mln)
  • USD/CAD: C$1.2675-80($672mln), C$1.2715-25($625mln)
  • USD/MXN: Mxn20.00($1.1bln-USD puts), Mxn20.30($510mln)

UP TODAY (Times GMT/Local)