MNI EUROPEAN OPEN: Japan Yields Lower Post Solid 30yr Auction/BoJ Speak

US TSYS: Tsys Futures Edge Lower, 10Y Yield Tests Trendline

• Treasury futures are slightly lower today, ranges have been tight. Futures made highs on the opened and have since edged lower TU is -0-00⅝ at 102-05⅜, while TY - 01+ at 110-08.
• Volumes: TU 33k, FV 55k TY106k - largely in line with Wednesday.
• Tsys flows: 5,606k Block UXY at 114-00, likely seller.
• The 10Y yield is now testing trendline support, while the recent move in Oil (down ~8% over the past week) could point to a break of the trendline support as the 10y yield has largely followed Oil prices over the past year by a few weeks. See chart 1 - Source BBG



• Cash treasury curve have moved wider today, yields are 1-2bps higher, the 2Y +1.6bp to 4.739%, the 10Y +1.7bps at 4.293%, the 2y10y +0.078 at -44.808.
• Late year rate cut projections have gradually gained vs. late Tuesday levels (*): June 2024 at -1.3% w/ cumulative rate cut -.3bp at 5.328%, July'24 at -18% w/ cumulative at -4.8bp (-4.3bp) at 5.283%, Sep'24 cumulative -19.8bp (-19.3bp), Nov'24 cumulative -28.9bp (-27.8bp), Dec'24 -47bp (-44.3bp).
• Looking ahead; Weekly Claims & Trade Balance as well as ECB policy announcement.

JGBS: Bull-Flattener Post-30Y Auction

JGB futures richer and just off session highs, +32 compared to the settlement levels.

• The market responded positively to strong demand metrics at today’s 30-year auction. The low price beat dealer expectations, the cover ratio increased and the auction tail narrowed. The 30-year JGB is dealing 6bps lower in post-auction trade.
• Like Tuesday's 10-year supply, today's outcome established a more optimistic tone ahead of next week’s BoJ monetary policy decision for a market that has experienced mounting pressure since mid-December, fueled by expectations of policy tightening from the BoJ.
• BoJ Governor Ueda stated in Parliament that price expectations must be around 2% to meet the price target, but current inflation expectations are still below 2%. He emphasised the need for caution on interest rates due to uncertainties in measuring the neutral rate and suggested that it is appropriate to reduce bond buying as part of the exit process.
• Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session.
• The cash JGB curve has bull-flattened, with yields 2-9bps lower. The benchmark 10-year yield is 5.3bps lower at 0.963% versus the cycle high of 1.101% set late last week.
• Swap rates are lower across maturities, with the 4-7-year zone outperforming.
• Tomorrow, the local calendar will see Household Spending data, and Coincident and Leading Indices alongside BoJ Rinban Operation covering 1-3-year and 5-25-year JGBs.

AUSSIE BONDS: Richer, ECB Policy Decision In Focus

ACGBs (YM +3.0 & XM +4.0) are richer and just off Sydney session highs.

• Outside of the previously outlined Home Loan Values and Trade Balance data, there hasn't been much in the way of domestic drivers to flag.
• Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after the recent rally extended to a fifth day yesterday following weaker-than-expected ADP Private Employment data.
• The focus now turns to Thursday's Weekly Claims and Unit Labor Costs as well as the ECB Policy Decision. Non-Farm Payrolls data is due on Friday.
• Cash ACGBs are 4bps richer, with the AU-US 10-year yield differential at -9bps.
• Swap rates are 3-4bps lower.
• The bills strip has bull-flattened, with pricing flat to +4.
• RBA-dated OIS pricing is 1-4bps softer for meetings beyond September. A cumulative 9bps of easing is priced by year-end.
• Tomorrow, the local calendar is relatively light, with the highlights being the Foreign Reserves data and RBA Deputy Governor Andrew Hauser’s Fireside Chat at Australia’s Economic Outlook event.

NZGBS: Closed Richer & At Session Bests, May-28 Tap Showed Strong Demand

NZGBs closed at the session’s best levels, 3bps richer. The previously outlined domestic data drop (CoreLogic House Prices, Construction Work and ANZ Commodity Prices) failed to provide much of a market moving catalyst.

• The market appeared more focused on today’s syndicated tap of the May-28 bond. News that an additional NZ$3.5bn of the line was issued, the high end of the issuance range of NZ$2-4bn, seemed to buoy the market. The bonds were issued at 4bps under the April 2027 nominal bond versus guidance 3-6bps under. There will be no further issuance of the bond prior to September 2024.
• Cash US tsys are dealing 1-2bps cheaper in today’s Asia-Pac session ahead of Weekly Claims and Unit Labor Costs as well as the ECB Policy Decision. Friday will see Non-Farm Payrolls data.
• Swap rates closed 4bps lower.
• RBNZ dated OIS pricing closed little changed. A cumulative 25bps of easing is priced by year-end.
• Tomorrow, the local calendar will see Mfg Activity data.

FOREX: USD Up From Lows, Dovish BoJ Rhetoric Curbs Yen Gains

The USD BBDXY index sits lower for the first part of Thursday's session, lats near 1250.10, but we are comfortably up from earlier lows (1248.99).

• USD/JPY got to lows of 155.37, but we sit back at 155.80 in recent dealings. The trough for the pair coincided with a speech from dovish BoJ board member Nakamura, who stated that the current easy policy settings are appropriate.
• Governor Ueda is before parliament at the moment and stated inflation expectations are rising but not yet at 2%. JGB yields are lower across the board, aided by a strong local debt auction, which is likely curbing yen appetite as well.
• AUD/USD is around 0.6660 currently, up 0.20%, but off earlier highs of 0.6683. Locally data showed better housing finance and trade surplus figures, although export growth is slowing.
• NZD/USD is back under 0.6200, drawing some selling interest on a move above this level, which is a fresh multi month high.
• In the cross asset space, US yields are 1-2bps higher, aiding the USD at the margins. The regional equity backdrop is positive, although gains are mostly sub those seen in Wednesday moves in EU/US markets.
• Looking ahead, US jobless claims, May Challenger job cuts, April trade and final Q1 productivity/ULC as well as April German orders and euro area retail sales print. The ECB decision is announced and a 25bp cut is expected.

ASIA STOCKS: HK & China Equities Mixed As Property Weigh On Sentiment

Hong Kong & Chinese equities are mixed today, is has been a quiet past week for local markets. Property remains front and center on investors minds, with the BI property gauge falling 20% from recent highs as doubts remain on Beijing’s efforts to bolster the sector while developers’ liquidity pressure still persists as sales remain weak. Regulators are considering suspending data feeds to financials institutions in order to stop speculations and volatility.

• Hong Kong equities are higher today, tech stocks are the top performing largely tracking moves made overnight in the US after the Philadelphia Semiconductor Index finished the session up 4.50%. The HSTech Index is up 1.30% and is now trading back above all EMAs, while the RSI is back above 50. Property is underperforming wider markets today with the Mainland Property Index is down 1.40% and the HS Property Index is up 0.42%, the wider HSI is currently trading 0.59% higher.
• China equites are slightly lagging their HK peers , small-cap indices are the worst performing with the CSI 1000 down 1.65% and the CSI2000 down 3.27% while the Growth focused ChiNext Index is down 0.17%, the large-cap CSI 300 is up 0.37%
• In the property space, Greentown China has repurchased $150 million of its 2.3% credit enhanced bonds due 2025, representing 37.5% of the originally issued amount, leaving $250 million outstanding, with the bonds backed by an irrevocable standby letter of credit from China Zheshang Bank.
• The Shanghai and Shenzhen stock exchanges are considering suspending granular market data feeds to institutions, including quantitative funds, to combat market volatility, according to Reuters.
• (MNI): MNI China Press Digest June 6: NIM, Car Sales, Carbon (See link)
• Looking ahead: Tomorrow we have China Trade Balance data.

ASIA PAC STOCKS: Asian Stocks Higher, As US Tech Names Rally

Asian equities are higher Today following moves made overnight after US tech names help push markets to new all time highs. Indian stocks rose after Prime Minister Narendra Modi secured crucial support from two key coalition allies, enabling him to extend his decade-long tenure in power. Global yields continue tighten as markets price in two fed rate cuts into year-end, while lower Oil prices could also help bring yields down further. Overnight, private payrolls showed hiring at companies grew at the slowest pace since the start of the year, with eyes now on the US jobs data out on Friday. Earlier, NZ ANZ commodity export prices rose, while construction work fell, AU April Trade Surplus widen, and Japan's Tokyo May Office vacancies rose.

• Japanese equities are higher today, although well of earlier highs, sentiment around fed cuts improve follow a slowdown in private job growth have help stocks. Tech stocks are performing well, following moves made overnight. While the yen weakens a touch and JGB yields falling is helping the local market. Earlier, the Japan Tokyo may office vacancies rose to 5.48% from 5.38% prior. The tech heavy Nikkei 225 is up about 0.60%, while the Topix is 0.30%.
• Taiwan equities have surged higher today and are now testing all time highs, the moves can be attributed to strong tech prices in the US overnight and weaker than expected US employment change which saw rate cut projections gain. The Taiex is up 2%
• Australian equities also higher today, earlier the Trade Surplus widened to 6,548M m/m in May vs. 5,500M expected, while home loan value jumped as higher rental yields attract property investors. All sectors are in the green today, with Financials the top performing, followed by industrial names. The ASX200 is up 0.80%.
• Elsewhere in SEA, New Zealand Equities are 0.10% lower as the NZD currency continues to tick higher. Singapore equities are 0.50% higher following weaker-than expected Retail Sales yesterday. The Indonesian JCI is 0.10% higher, earlier we broke back above 7,000 and were up over 1%. The Philippines PSEi is up 0.80% following the unemployment rate rising to 4$ from 3.9%. Indian equities are 0.70% higher after President Modi secured support.

OIL: Crude Holding Onto Gains But Outlook Soft

Oil prices have continued Wednesday’s rise during today’s APAC trading. Crude found a floor when the market appeared oversold. Better risk sentiment and a softer US dollar (USD index -0.1%) have also provided support. WTI is up 0.5% to $74.47/bbl, close to the intraday high of $74.59, while Brent is 0.4% higher at $78.71 after reaching $78.84.

• On Sunday OPEC announced that it would reduce its production cuts from October but it retains the flexibility to alter that plan depending on market developments. Saudi Aramco has cut prices for June shipments to Asia for the first time since February though, which is a sign that it is concerned about demand in the region.
• The EIA reported a US crude inventory build of 1.23mn barrels with gasoline up 2.1mn, highest in just over 2 months, and distillate 3.2mn. Refinery utilisation rose 1.1pp to 95.4%, higher than expected. Implied demand for gasoline and distillate were both lower.
• Later US jobless claims, May Challenger job cuts, April trade and final Q1 productivity/ULC as well as April German orders and euro area retail sales print. The ECB decision is announced and a 25bp cut is expected.

GOLD: Lower US Treasury Yields Provide Support

Gold is 0.5% higher in the Asia-Pac session, after closing 1.2% higher at $2355.32 on Wednesday. The yellow metal has been in a $2,320-2,360 for most of the last nine sessions.

• Bullion was supported by US Treasuries, which extended their recent rally to a fifth day.
• US Treasuries cheered further signs of a slowing job market and cooling price pressures, with the BoC's policy easing and plans for another in July bolstering hopes for global rate cuts.
• ADP jobs gain was lower than expected at +152k vs. +175k est (192k prior down-revised to +188k).
• Fast two-way flow reported after mixed ISM Services data: Index higher than exp (53.8 vs. 51.0 est) but lower Prices Paid (58.1 vs. 59.0 est).
• The focus now turns to Thursday's Weekly Claims and Unit Labor Costs as well as the ECB Policy Decision, followed by Friday's Non-Farm Payrolls data.
• According to MNI’s technicals team,a bear cycle in gold remains in play for now, although the medium-term trend structure is bullish, and the recent move down appears to be a correction that is allowing an overbought condition to unwind.
• A resumption of gains would open $2,452.5 next, a Fibonacci projection. The 50-day EMA, at $2,312.0, represents a key support.