Trial now

Pullback Considered Corrective


Holding Above Recent Lows


BLOCK, Large 3Y Midcurve Put Condor

Sign up now for free access to this content.

Please enter your details below and select your areas of interest.



Fig. 1: Australia 3- & 10-Year Yields (%)

Source: MNI - Market News/Bloomberg


CORONAVIRUS: Vaccine certificates are set to be required to enter nightclubs and other large, crowded vues in England, sparking warnings from hospitality businesses that the plan will put thousands of jobs at risk. Prime Minister Boris Johnson appealed to millions of young people to come forward for their Covid shots, saying some of "life's pleasures" will be "increasingly dependent on vaccination." (BBG)

CORONAVIRUS: Only the most vulnerable children and those living with at- risk adults will receive Covid-19 vaccinations in the U.K., the government said Monday, ruling out a broader program due to fears over rare side effects. The Pfizer-BioNTech vaccine will be offered to 12 to 15- year-olds with severe neuro-disabilities, Down's Syndrome, immunosuppression and profound learning disabilities, as well as children aged 12 to 17 who live with an immunosuppressed person, officials said. It will also be offered to healthy 17-year-olds within three months of their 18th birthday. The decision puts the U.K. on a different path than countries including the U.S. and France. The British position is driven by fears of rare cases of myocarditis -- an inflammation of the heart muscle -- and pericarditis -- an inflammation of membranes around the heart -- in younger people who have had the Pfizer and Moderna vaccines. (BBG)

CORONAVIRUS: Boris Johnson marked England's so-called freedom day by announcing emergency plans to exempt key workers from self-isolation rules that are causing massive economic and social disruption. Johnson's decision to lift most remaining Covid restrictions was also accompanied by an announcement that new rules — requiring a double-vaccination to enter a nightclub — would be introduced in September. "Freedom day for nightclubs lasted around 17 hours," said Michael Kill, chief executive of the Night Time Industries Association. Tory MPs criticised Johnson for announcing new Covid rules on the very day they were lifted. (FT)

CORONAVIRUS/POLITICS: Boris Johnson did not want to tighten restrictions last autumn as "the people who are dying are essentially all over 80", Dominic Cummings has claimed. In an interview with the BBC, the PM's former senior adviser alleges that Mr Johnson said in leaked messages that he no longer believed "all this NHS overwhelmed stuff" as he refrained from imposing England's second lockdown. Mr Cummings has repeatedly accused the prime minister of acting too slowly in enacting the second lockdown which came into force in early November. (Sky)

CORONAVIRUS: Sixty percent of people being admitted to hospital with COVID-19 are unvaccinated, the government's chief scientific adviser has said. Earlier, Sir Patrick Vallance told a news briefing that figure was for double-jabbed people. But he later corrected himself on Twitter, saying the original statistic was false. He posted: "Correcting a statistic I gave at the press conference today, 19 July. "About 60% of hospitalisations from COVID are not from double-vaccinated people, rather 60% of hospitalisations from COVID are currently from unvaccinated people." Speaking at the briefing alongside Boris Johnson - who appeared remotely from Chequers where he is self-isolating - Sir Patrick said hospitalisations could rise to over 1,000 a day. He added: "But the rates should be lower than they have been previously because of the protective effects of vaccination." (Sky)

BOE: MNI BRIEF: BOE Nominee Mann: Doesn't See Inflationary Spiral

  • Incoming Bank of England Monetary Policy Committee member Catherine Mann said Monday that what was emerging now was "a major surge" in inflation but that she does not expect it to persist." I don't see it becoming a spiral," she said, noting a lack of inflation from the global recovery and that labour market tightness was not commensurate with the headline growth data. Mann told the Treasury Select Committee that policymakers should be wary of premature tightening, resulting in permanent GDP losses - on MNI MainWire and email now, for more details please contact

BOE: MNI BRIEF: BOE Incomer Mann: Doubts Benefits Of Negative Rates

  • Catherine Mann, who is set to join the Bank of England Monetary Policy Committee in September, believes the current economic recovery is more fragile than headline activity data suggests but she has doubts about the benefits of negative interest and dislikes the idea of tying policy tightening to closing the output gap. Mann's written answers to the Treasury Select Committee were mainly theoretical, stressing that she needed to look more closely at the economic situation from within the Bank but some themes did emerge - on MNI MainWire and email now, for more details please contact

FISCAL: Boris Johnson and senior ministers have agreed to increase national insurance to fund long-term reform of social care and reduce NHS waiting lists, The Times has been told. The prime minister is expected to announce plans to increase payments by 1 percentage point — a penny in the pound — for both employers and employees in a move that will raise £10 billion a year. The new health and social care tax will initially be used to address the NHS backlog following the pandemic. Sajid Javid, the health secretary, has raised concerns that the waiting list could rise from 5.3 million to 13 million. (The Times)


FRANCE: The French government is going ahead with its new plan to fight new COVID-19 infections and relieve pressure that could again submerge hospitals with some tweaks such as reduced fines, government spokesman Gabriel Attal said on Monday. "We have entered the fourth wave of the epidemic," Attal said after a meeting of the French cabinet. The plan, which notably includes requiring a health pass in a wide array of venues such as restaurants or cinemas and making vaccination mandatory for health workers, accounts for some of the toughest anti-covid measures in Europe. (RTRS)


ECONOMY: Joe Biden sought to soothe fears that rising inflation could hurt the US recovery and undermine his $4tn spending plans, saying the administration would remain vigilant about rising prices and that he expected the Federal Reserve to take action if needed. Speaking from the White House on Monday, the US president touted the burst of job creation and economic growth during his first six months in office as pandemic restrictions were lifted and households benefited from large doses of fiscal stimulus. But the latest uptick in coronavirus cases due to the spread of the Delta variant and higher-than-expected inflation figures in recent months could jeopardise at least some of the economic bounceback, posing a political problem for the president. (FT)

ECONOMY: The Covid-19 recession is in the books as one of the deepest — but also the shortest — in U.S. history, the official documenter of economic cycles said Monday. According to the National Bureau of Economic Research, the contraction lasted just two months, from February 2020 to the following April. Though the drop featured a staggering 31.4% GDP plunge in the second quarter of the pandemic-scarred year, it also saw a massive snapback the following period, with previously unheard of policy stimulus boosting output by 33.4%. "In determining that a trough occurred in April 2020, the committee did not conclude that the economy has returned to operating at normal capacity," the NBER said in a news release. "The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession associated with the February 2020 peak. The basis for this decision was the length and strength of the recovery to date." (CNBC)

FISCAL: Senate Majority Leader Chuck Schumer cemented plans for a Wednesday cliff-hanger vote on whether to begin debate on a $579 billion infrastructure plan that does not yet exist. The New York Democrat's move comes after negotiators failed through the weekend to reach a compromise on the bipartisan measure. Schumer's procedural maneuver puts pressure on the bipartisan group of 22 senators negotiating the package, but it also risks upending momentum behind a deal and handing him an embarrassing defeat. Republicans have insisted a deal probably can't be reached by Wednesday and a number have said they won't support starting debate without legislation in hand. "We need to see the bill before voting to go to it," Senate GOP leader Mitch McConnell said. "I think that's pretty easily understood." (BBG)

FISCAL: Senate Republicans in bipartisan talks on a $579 billion infrastructure deal are warning Majority Leader Chuck Schumer that if he goes through with a Wednesday vote to start debate on the plan he won't have their support and his attempt to enforce a deadline will fail. Maine Senator Susan Collins said there is "no way" the group of 22 Republicans and Democrats can finish pulling together a bill by Wednesday with many issues still outstanding, including how to pay for it. Without legislation in hand, Republicans say they will deny Schumer the votes he would need to move ahead. "We need to see the bill before voting to go to it," Senate GOP leader Mitch McConnell said. "I think that's pretty easily understood."

FISCAL: A CNN reporter tweeted the following on Monday: "Sen. John Cornyn, a member of GOP leadership, says he's a NO on Wednesday's procedural vote and he doesn't think there would be 10 Republicans to open debate if no bipartisan infrastructure deal is secured by then. "I don't think they're gonna get there," Cornyn told me." (MNI)

FISCAL: Senate Budget Committee Chair Bernie Sanders, a Vermont independent, said he doesn't have an estimate of when a budget resolution text will be ready. He said if the infrastructure deal falls apart, he wants it included in that package. (BBG)

CORONAVIRUS: Top U.S. infectious-disease expert Anthony Fauci said the delta variant of the coronavirus is causing a significant increase in infections and the Biden administration is "practically pleading" with people to get vaccinated. Delta is much more capable of spreading from person to person than earlier variants, Fauci said in an interview on Bloomberg TV's "Balance of Power with David Westin," stressing that vaccines can protect people from clinically significant disease. (BBG)

CORONAVIRUS: New York City Mayor Bill de Blasio said he has no plans to renew indoor mask mandates despite a spike in cases stemming from the delta Covid-19 variant and a move by Los Angeles to again require residents to wear masks inside. The seven-day average Covid-19 positivity rate in the city jumped to 1.69% on Saturday, more than double the percentage of residents who tested positive from last month. The delta variant makes up 69% of cases sequenced, Health Commissioner Dave Chokshi said at the mayor's daily briefing. (BBG)

CORONAVIRUS: Virus hospitalizations in Texas topped 3,000 for the first time in more than three months, state health department figures showed. Medical facilities across the Lone Star state said 3,046 beds were occupied by virus patients, the most since April 12, according to the health department. The hospital tally has been rising for 17 straight days, the longest upward streak since November. Despite the surge, there were still almost 11,000 available hospital beds and more than 700 open intensive-care spots. (BBG)

CORONAVIRUS: The U.S warned citizens not to travel to the UK and Indonesia, two nations that are seeing a jump in Covid infections. The State Department raised its advisory for both countries to Level 4, or do not travel, from Level 3, or reconsider travel. India, where infections are still hovering near 40,000 a day but are a fraction of the highs in May, had its advisory lowered to Level 3 from Level 4. (BBG)


U.S./CHINA: At an event about the administration's infrastructure plan, U.S. President Joe Biden told reporters: "My understanding is that the Chinese government, not unlike the Russian government, is not doing this themselves, but are protecting those who are doing it. And maybe even accommodating them being able to do it." White House spokeswoman Jen Psaki was later asked at her daily briefing why Biden did not directly blame the Chinese government in his response to a reporter's question. "That was not the intention he was trying to project. He takes malicious cyber activity incredibly seriously," Psaki said. Psaki also said the White House does not differentiate between Russia's and China when it comes to cyber attacks. "We are not holding back, we are not allowing any economic circumstance or consideration to prevent us from taking actions ... also we reserve the option to take additional action." she said. (RTRS)

GEOPOLITICS: China firmly rejects statements from EU and NATO about "malicious cyber activities" undertaken from Chinese territory, China's Mission to the European Union says in a statement. The allegations in the statements are not based on facts and evidence, but on "speculation and groundless accusations," the Chinese diplomatic mission says. China is closely monitoring the moves of NATO, which is trying to expand beyond its geographical and sectoral constraints under the guise of cybersecurity and other issues. (BBG)

JAPAN: Hokkaido prefecture in northern Japan will ask the central government to reimpose strong coronavirus measures as infections in the capital city of Sapporo are increasing rapidly, public broadcaster NHK reports, without attribution. The prefectural government will hold a meeting Tuesday to make a formal decision on the request. The prefecture will start imposing own measures from July 22 asking Sapporo residents not to make unnecessary outings and requesting public facilities to shut. (BBG)

AUSTRALIA: Australia's Victoria state extended its fifth lockdown since the pandemic began and tightened border restrictions with Sydney as authorities battle to contain an outbreak of the delta variant. Stay-at-home orders will remain in place for another seven days until midnight July 27 after Victoria recorded 13 new locally-acquired cases for a second straight day, state Premier Daniel Andrews told reporters Tuesday. The state will effectively shut its border to people from Sydney, with exceptions for essential workers such as freight drivers and for compassionate reasons, he said. (BBG)

AUSTRALIA: South Australia will go into lockdown from 6:00pm tonight, after health authorities confirmed the state's outbreak is the Delta strain. They have so far identified five cases linked to the current cluster. The lockdown will last for seven days. The fifth case was identified in a diner who went to The Greek on Halifax restaurant on Saturday night at the same time as a contact of the original case — a man who came back from Argentina earlier this month. "We hate putting these restrictions in place but we believe we have one chance to get this right," Mr Marshall said. (ABC)

RBA: MNI BRIEF: RBA Sees "Alternative Scenarios" For Rates

  • The Reserve Bank of Australia's decision not to extend its three-year yield target to bonds maturing in November 2024 was driven by a wider range of "alternative plausible scenarios" for interest rates, according to the minutes of the July board meeting released on Tuesday. The minutes show that previous yield target for April 2024 bonds implied that the RBA would not increase its cash rate until 2024, but the decision not to extend the target was based on the "faster than expected recovery" and potential implications for interest rates. The RBA has held rates at the record low of 0.10% since November last year, and until recently its view has been that rates will not rise again until "2024 at the earliest" but the July minutes show the bank does not see conditions for a rate rise "before 2024" - on MNI MainWire and email now, for more details please contact

CANADA: Prime Minister Justin Trudeau's government presented a road map to reopening Canada's borders to non-essential international travel beginning next month. Fully vaccinated U.S. residents will be allowed into Canada as of Aug. 9, according to a plan unveiled Monday in Ottawa. Tourists will need to provide border officials with proof of vaccination and a negative Covid-19 test completed before arrival. They will be exempt from the 14-day quarantine and two post-arrival coronavirus tests. (BBG)

MEXICO: Mexican state-owned electricity utility CFE plans to issue as much as $1 billion in senior, unsecured 12-year notes, according to a roadshow presentation. The debt sale was planned for as soon as Tuesday, but banks were consulting with the CFE after Monday's sharp losses across markets due to the spread of the delta variant, according to two people familiar with the transaction who asked not to be identified because they're not authorized to speak about it. Companies are trying to lock in low interest rates at a time when economic recovery is stoking inflation concerns that could lead to monetary tightening. Net proceeds from the offering will be used to refinance a syndicated revolving credit facility in dollars due 2023, as well as a short-term peso-denominated credit facility due in 2021. CFE didn't immediately respond to a request for comment. (BBG)

MEXICO: Mexico's tax chief wants to crack down on key incentives for global automakers to produce in the country, the government's latest effort to boost revenue by going after large companies. Raquel Buenrostro, the head of Mexico's tax authority known as SAT, said in an interview her proposal is awaiting approval by the Finance Ministry, and is part of a package of measures to increase tax collection by 1% of gross domestic product next year. (BBG)

RUSSIA: The United States and Germany are expected to announce in coming days a deal resolving their long-standing dispute over Russia's $11 billion Nord Stream 2 natural gas pipeline, sources familiar with the matter said on Monday. President Joe Biden and German Chancellor Angela Merkel failed to settle their differences over the undersea pipeline when they met last week, but agreed Moscow must not be allowed to use energy as a weapon against its neighbors. A deal is now in sight after discussions among U.S. and German officials about U.S. concerns that the pipeline, which is 98% complete, will increase Europe's dependence on Russian gas, and could rob Ukraine of the transit fees it now collects on gas pumped through an existing pipeline. (RTRS)

SOUTH AFRICA: South Africa vaccinated a record 223,969 people against Covid-19 on Monday, indicating that its inoculation program has overcome disruptions from widespread rioting last week. Daily vaccinations last week fell to as low as about 137,000 as the administering of the shots was disrupted in Gauteng and brought to a virtual halt in KwaZulu-Natal, the province worst hit by the violence. (BBG)

IRAN: International monitors are watching Iran's fast-expanding nuclear program with growing alarm, as Tehran refuses to extend an expired inspections pact and insists the experts must trust that it's accurately documenting uranium-enrichment activities. Iran claims it's still preserving data captured by International Atomic Energy Agency monitoring equipment, the agency's director general, Rafael Mariano Grossi, said in an interview in Rio de Janeiro. But officials won't give his investigators access to it until Iran concludes stalled talks with world powers to restore a broader 2015 agreement that lifted sanctions. "It's a rather uncomfortable situation for us because this assurance is informal in nature and we don't know whether this is the case or not," Grossi said on Monday. "But we do not have a choice." (BBG)

ISRAEL: Israel carried out an aerial attack southeast of Syria's northern Aleppo province late Monday, a Syrian military official said. The unidentified military official, quoted by the state news agency SANA, said Syrian air defenses shot down most of the missiles in the attack that occurred just before midnight. The targets are still being identified, the official said. The Britain-based Syrian Observatory for Human Rights, a war monitor that has activists on the ground in Syria, said the Israeli strikes targeted weapons depots that belong to Iranian-backed militia operating in Aleppo's Safira region. The group said the strikes were followed by loud explosions. The weapons depots were located inside Syrian military posts, the group said. (AP)

ISRAEL: Israeli artillery struck Lebanon in response to two rockets fired earlier from the country, the Israel Defense Forces say in a tweet. Two rockets were fired from Lebanon toward northern Israel, the Israel Defense Forces said in an earlier tweet. One rocket was intercepted by the Iron Dome defense system, and the other fell in an open area inside Israel. (BBG)

METALS: Brazilian mining giant Vale SA produced slightly less iron ore than expected last quarter because of teething problems at a new plant in a fresh blow to an already tight global market for the steelmaking ingredient. The world's second-largest iron producer churned out 75.7 million metric tons in the second quarter compared with the 78 million-ton average estimate among analysts tracked by Bloomberg. The result was still up from both the previous three months and the Covid-impacted year-ago period. (BBG)

METALS: BHP Group reported June quarter iron ore shipments rose 12% and said it could further increase production in fiscal 2022 as it strives to meet robust demand from Chinese steel mills. Total iron ore sales in the three months to June 30 were 73.7 million tons, BHP said Tuesday in a statement, up from 66 million tons in the March quarter and in line with a median forecast of 73.6 million tons. Full-year output of 284.1 million tons met the company's guidance for the upper half of a range of 276 to 286 million tons. The Melbourne-based miner sees shipments from its Western Australia iron ore operations in a range of 278 to 288 million tons in fiscal 2022. (BBG)

METALS: A definitive settlement with miner Samarco and owners, BHP Group and Vale SA, for the damage caused by a burst tailings dam in 2015 could reach 100 billion reais ($19.06 billion), the governor of the Brazilian state where the disaster occurred told Reuters. That estimate is nearly four times higher than an initial deal struck with mining companies in 2016, which created a foundation to implement reparations and temporarily froze lawsuits relating to the incident. "The expectation is that the agreement is around 100 billion reais," Romeu Zema, governor of Minas Gerais, told Reuters in an interview late on Friday. (RTRS)


PBOC: MNI BRIEF: PBOC Keeps LPR Unchanged for 15th Month

  • China's central bank on Tuesday left its benchmark rate for loans unchanged for the 15th straight month even after a cut in the cash reserve requirement ratio for banks by 50 bps earlier this month. The Loan Prime Rate, guiding companies' cost of borrowing, remains at 3.85% for the one-year maturity and 4.65% for five years. Market participants were divided over the need for more easing including a lower LPR right after the RRR cut, as data last week allayed fears of a further slowdown in China's growth - on MNI MainWire and email now, for more details please contact

COMMODITIES: Coal prices in China may not stabilize until August as supplies are expected to rise then, the Shanghai Securities News reported citing industry analysts. Regulatory policies will help major local coal mines to boost production capacities while imports are also projected to increase, the newspaper said citing a report by the China Electricity Council's CECI office. Some smaller thermal power plants cannot get supply due to the ongoing shortages, which the newspaper said were caused by record electricity consumption in many regions, the newspaper said. China has expanded its annual coal production capacity by 140 million tons per year in H1 and will add another 110 million tons in H2, while adding coal reserve storage capacities by about 600 million tons, about 15% of its annual consumption, the newspaper said citing the top planner NDRC. (MNI)

PROPERTY: China's housing prices may slow further in H2 as the market enters another phase of correction following policies that restrict credit lending, the China Securities Journal reported citing a research report by Tianfeng Securities. New home sales last week in 36 large cities slid 13.2% from a week ago, with the top-tier cities plunged 23.25%, the newspaper said citing the brokerage's data. Some developers reported double-digit drops in June sales from last year, the newspaper said. While regulatory efforts will continue to contain the housing industry, regional governments may support a stable market to help boost incomes as they grapple with slowing fiscal revenue growth, the newspaper said. (MNI)

DIGITAL YUAN: China needs the digital yuan, a new type of retail payment tool, to help drive its digital economy and achieve high-quality growth, the Securities Times said in a commentary on the recently released PBOC White Paper on digital currency. The digital yuan is safer to protect user privacy and could make basic financial services more efficient, the Times said. The launch of digital yuan will help withstand potential financial risks from cryptocurrencies such as Bitcoin, which could threaten international monetary system and cross-border capital flow management, the newspaper said. (MNI)


JAPAN JUN CPI +0.2% Y/Y; MEDIAN +0.2%; MAY -0.1%
JAPAN JUN CORE CPI +0.2% Y/Y; MEDIAN +0.2%; MAY +0.1%


Consumer confidence fell by 5.2% as the lockdown in Sydney was tightened and extended and another lockdown was imposed in Melbourne. Confidence actually dropped the most in Adelaide (-9.5%) and Perth (-8.2%) and was also down sharply in Sydney (-4.8%) and Melbourne (-3.7%). The subindices that capture economic conditions and 'time to buy a major household item' are at their worst levels since early November 2020, highlighting some renewed caution of households–albeit nowhere near the lows seen in the early stage of the pandemic. The four-week moving average for inflation expectations has been at or above the 4.0% mark for the past five weeks, cementing the return to pre-COVID levels. (ANZ)



The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Tuesday. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing today, according to Wind Information.

  • The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
  • The 7-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2000% at 09:27 am local time from the close of 2.1468% on Friday.
  • The CFETS-NEX money-market sentiment index closed at 49 on Monday, compared with 40 on Friday.


The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 6.4855 on Tuesday, compared with the 6.4700 set on Monday, marking the weakest parity since May 6, 2021.


SNAPSHOT: RBA Speculation Rife

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

  • Nikkei 225 down 241.51 points at 27410.52
  • ASX 200 down 48.879 points at 7237.1
  • Shanghai Comp. down 17.553 points at 3521.57
  • JGB 10-Yr future up 13 ticks at 152.49, yield down 0.5bp at 0.010%
  • Aussie 10-Yr future up 7.0 ticks at 98.825, yield down 7.3bp at 1.173%
  • U.S. 10-Yr future -0-03 at 134-19, yield up 0.33bp at 1.192%
  • WTI crude up $0.10 at $66.52, Gold up $4.78 at $1817.38
  • USD/JPY up 1 pip at Y109.47

BOND SUMMARY: Core FI Better Bid Into European Hours

It has been a quiet Asia-Pac session in terms of broader news flow. We haven't seen much to drive the recent bid in the U.S. Tsy space, but e-minis are off best levels, with Bitcoin trading back below $30,000 for the first time since late June. We are always cautious when pointing to direct correlations with cryptocurrencies, but that could be at least a partial driver here. Also, the bid in the ACGB space could be providing another (modest) leg of support. T-Notes last -0-02 at 134-20, after tagging best levels of 134-21 in recent dealing, once again operating on healthy volume of ~125K. The belly of the cash curve has seen some modest outperformance, with the major benchmarks across the Tsy curve running little changed to 1.0bp richer into European hours.

  • JGB futures have stuck to the upper half of the overnight range for most of the Tokyo session, and last deal +15. The major cash JGB benchmarks have generally richened by 0.5-1.0bp, given the dynamic in core global FI markets & JGB futures overnight, with 10s moving back to their recent 0.01% low. Still, technical resistance for futures in the form of the July 9 high (152.59) remains untouched. The latest liquidity enhancement auction covering off-the-run 5- to 15.5-Year JGBs saw a soft cover ratio, although this didn't have much, if any, impact.
  • The Aussie bond space has drawn a modest bid from Westpac chief economist Bill Evans flagging the potential for the RBA to temporarily lift its bond purchases to A$6bn/week at its September meeting (and thus reverse its decision to taper to A$4bn/week), please see the earlier bullet for more details on Evans' comments. YM +5.0, XM +8.0. The 10- to 12-Year zone of the cash ACGB curve has outperformed.

JGBS AUCTION: Japanese MOF sells Y2.7690tn 6-Month Bills:

The Japanese Ministry of Finance (MOF) sells Y2.7690tn 6-Month Bills:
  • Average Yield -0.1215% (prev. -0.1116%)
  • Average Price 100.061 (prev. 100.056)
  • High Yield: -0.1176% (prev. -0.1096%)
  • Low Price 100.059 (prev. 100.055)
  • % Allotted At High Yield: 33.8376% (prev. 25.2123%)
  • Bid/Cover: 4.348x (prev. 4.700x)

JGBS AUCTION: Japanese MOF sells Y498.8bn of 5-15.5 Year JGBs in liquidity enhancement auction:

The Japanese Ministry of Finance (MOF) sells Y498.8bn of 5-15.5 Year JGBs in a liquidity enhancement auction:
  • Average Spread: -0.012% (prev. -0.017%)
  • High Spread: -0.011% (prev. -0.016%)
  • % Allotted At High Spread: 92.3159% (prev. 21.7695%)
  • Bid/Cover: 3.188x (prev. 4.424x)

EQUITIES: Another Negative Day In Asia

Another negative day for equities in the Asia-Pac region, though moves are not as dramatic as yesterday there is still a broad risk off tone on concerns over the delta variant. In mainland China bourses are lower by around 0.6%, the PBOC opted to keep LPR rates on hold despite some speculation of a cut. In Japan markets are down around 0.4%, CPI rose 0.2%, in line with estimates, though coronavirus concerns weigh. In the US futures are higher, rebounding from a sharp sell off yesterday. US futures are higher by around 0.5%, S&P e-minis approaching support turned resistance at 4279.25, the low from July 8.

OIL: Crude Arrests Decline

Crude futures have paused their decline for now after plunging on Monday; WTI is up $0.49 from settlement levels at $66.91/bbl, Brent is down $0.02 at $68.80/bbl. After a failed deal at last month's meeting sent oil markets through an acute spell of strength, OPEC+ finally struck an out-of-cycle agreement to turn on an extra 400,000bpd of extra supply every month from August onwards. This boost to supply met soggy demand for growth proxies as equities globally sank sharply. This manifested in a near-8% slide for WTI crude futures, the sharpest decline since the market-breaking drop into negative territory last year. WTI crude futures now eye support at the $66.02/bbl 100-dma, with the June rally in prices now all but erased. Sentiment has been broadly negative in the Asia time zone over concerns around the delta variant of COVID-19.

GOLD: Holding Between The Lines

Gold continues to trade within the well-defined technical parameters, with spot last dealing little changed around the $1,820/oz mark. Monday saw the yellow metal briefly show below $1,800/oz before the DXY pulled back from fresh multi-month highs, allowing gold to recover. Initial lines in the sand come in the form of the Jul 12 low/key near-term support ($1,791.7/oz) and the July 15 high/bull trigger ($1,834.1/oz). U.S. Tsy yield and USD dynamics remain key, as ever.

FOREX: Risk Aversion Lingers In Asia

Asia-Pac equity benchmarks retreated on a negative lead from Wall Street and the PBOC's decision to refrain from cutting its LPRs, which put a bid into the yen, even as U.S. e-mini futures edged higher. JPY gained despite the fact that it is a Gotobi Day in Japan, blipping higher as e-minis trimmed some of their prior advance.

  • The Antipodeans traded on a softer footing. AUD/USD re-tested its fresh cycle low of $7322 printed yesterday, but struggled to breach that level. NZD/USD operated within the confines of yesterday's range, while hawkish RBNZ bets got trimmed further, despite the absence of any notable local headline flow.
  • USD/CNH moved away from the CNH6.5000 region, which provides a key near-term layer of resistance. The PBOC set the central USD/CNY mid-point just 4 pips above sell-side estimate, but the main focus was on monthly LPR fixing, with rates left unchanged despite some speculation of a cut.
  • Activity across the region may have been limited by market closures in Singapore, Indonesia, Malaysia and the Philippines in observance of a major Islamic holiday. Major USD crosses held fairly tight ranges.
  • U.S. housing starts and building permits take focus on the data front today, while ECB's Villeroy headlines the central bank speaker slate.

FOREX OPTIONS: Expiries for Jul20 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.1750-70(E765mln), $1.1800-15(E1.6bln), $1.1850-60(E836mln), $1.1880-90(E1.2bln)
  • USD/JPY: Y108.70-85($715mln), Y110.00-10($881mln), Y110.50-55($725mln)
  • EUR/JPY: Y130.75(E880mln)
  • USD/CAD: C$1.2200($832mln)
  • USD/CNY: Cny6.4820($1.4bln), Cny6.50($565mln)

UP TODAY (Times GMT/Local)