Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- UEDA PLEDGES EASY POLICY, FLAGS YCC OPTIONS (MNI)
- WHITE HOUSE SAYS NOMINATION TO FILL FED VACANCY WILL COME IN 'NEAR FUTURE' (DOW JONES)
- RBNZ’S SILK SAYS THERE ARE UPSIDE RISKS TO INFLATION OUTLOOK (BBG)
- CHINA REITERATES POSITION ON UKRAINE IN NEW 12-POINT PAPER AS CLAIMS TO NEUTRALITY QUESTIONED (CNN)
Fig. 1: 10-Year JGB Yield Vs. Japan 10-Year Swap Rate
Source: MNI - Market News/Bloomberg
UK
POLITICS: Dozens of sitting Tory MPs could be ousted as part of a “reckoning” by Conservative Party members furious at the way Boris Johnson was forced from office, a grassroots activist has claimed.(Telegraph)
EUROPE
BANKS: Deutsche Bank AG looked at buying parts of Credit Suisse Group AG assets as recently as last fall after the Swiss firm became engulfed by a series of scandals and financial hits, according to people with knowledge of the matter. (BBG)
RATINGS: Sovereign rating reviews of note schedule for after hours on Friday include:
- Fitch on the Netherlands (current rating: AAA; Outlook Stable)
- Moody’s on Austria (current rating: Aa1; Outlook Stable) & Sweden (current rating: Aaa; Outlook Stable)
- S&P on Austria (current rating: AA+; Outlook Stable)
- DBRS Morningstar on Slovakia (current rating: A (high), Negative Trend)
U.S.
FED: The White House is planning to make a nomination for vice chair of the Federal Reserve in the "near future," press secretary Karine Jean-Pierre said Thursday, without giving more details on timing. (Dow Jones)
FED: The Federal Reserve's historic tightening of monetary policy is only beginning to negatively affect the labor market, although conditions are not quite as tight as they appear, Kansas City Fed economists Jose Mustre-del-Rio and Emily Pollard, whose work studies this lagged impact, told MNI. (MNI)
BONDS: Investors pulled $6.12 billion from funds that invest in US corporate high-yield bonds in the week ending Feb. 22, the third-largest outflow on record, amid heightened volatility and a multi-week slump in junk rated debt. (BBG)
OTHER
U.S./CHINA/TAIWAN: No US troops are stationed in Taiwan, Defense Minister Chiu Kuo-cheng says in Taipei, in response to questions from lawmakers. Exchanges with the US have been non-stop as Taiwan gets its weapons from the US. (BBG)
BOJ: Incoming Bank of Japan (BOJ) Governor Kazuo Ueda said on Friday the central bank must maintain ultra-low interest rates to support the fragile economy, warning of the dangers of responding to cost-driven inflation with monetary tightening. (RTRS)
BOJ: Bank of Japan governor nominee Kazuo Ueda said shortening the long-term interest rate target may be an option that emerged from a review as he pledged to maintain easy policy to ensure the 2% price target was achieved in a stable and sustainable manner. (MNI)
JAPAN: Nearly half of Japanese firms say that new leadership at the central bank should revise its negative interest rate policies, while more than a quarter say its price target should be changed, according to a Reuters monthly poll. (RTRS)
RBNZ: Reserve Bank of New Zealand Assistant Governor Karen Silk said there are still upside risks to the inflation outlook and the forecast peak in the bank’s cash rate is “not set in stone.” (BBG)
NEW ZEALAND: New Zealand's Fonterra Co-operative Group Ltd FCG.NZ on Friday slashed its farmgate milk price range forecast for the third time, and lowered its milk collection outlook for the 2022/23 season on account of softening demand and adverse weather conditions. (RTRS)
NORTH KOREA: South Korea and the United States have agreed to hold additional tabletop exercises (TTXs) in the near future to enhance their joint deterrence against North Korean nuclear threats, the U.S. Department of Defense said Thursday. (Yonhap)
RUSSIA: The United Nations General Assembly overwhelmingly isolated Russia on Thursday, marking one year since Moscow invaded Ukraine by calling for a "comprehensive, just and lasting peace" and again demanding Russia withdraw its troops and stop fighting. (RTRS)
RUSSIA: China's deputy U.N. Ambassador Dai Bing told the United Nations General Assembly on Thursday that one year into the Ukraine war "brutal facts offer an ample proof that sending weapons will not bring peace." "Adding fuel to the fire will only exacerbate tensions," he said. (RTRS)
RUSSIA: China has reiterated its calls for a political settlement to the Ukraine conflict on the one-year anniversary of Russia’s invasion, as Beijing comes under increasing pressure from the United States and its allies over its growing partnership with Moscow. In a newly released position paper Friday, China’s Foreign Ministry called for a resumption of peace talks, an end to unilateral sanctions, and stressed its opposition to the use of nuclear weapons. (CNN)
RUSSIA: China should fulfill its responsibility to defend the U.N. charter in the face of aggression by Russia, Jorge Toledo, the ambassador of the European Union to China, said on Friday. Toledo made the comment as part of a speech to dozens of diplomats at a ceremony in Beijing to mark the one year anniversary of the start of Russia's invasion of Ukraine. (RTRS)
RUSSIA: China’s government probably approved of Chinese firms providing Russia non-lethal, “dual-use” support for its war in Ukraine, Secretary of State Antony Blinken said Thursday, in remarks that underscore growing US concern that Beijing may go further and help arm President Vladimir Putin’s forces. (BBG)
RUSSIA: Russia is in talks with a Chinese manufacturer about buying 100 drones, with a delivery date of April, German magazine Der Spiegel reported on Thursday, without citing specific sources. (RTRS)
RUSSIA: National Security Adviser Jake Sullivan vowed the US would do everything it could to get the key equipment that Ukraine needs, although he said F-16s fighter jets – which Kyiv has requested – were not "the key capability" needed for now. Sullivan also asserted that "Russia has already lost this war." (CNN)
RUSSIA: The US will send Ukraine another $2 billion in security assistance, National Security Advisor Jake Sullivan said Thursday night. (BBG)
RUSSIA: U.S. President Joe Biden will meet virtually on Friday with G7 leaders and Ukrainian President Volodymyr Zelenskiy and will announce a new wave of sanctions against Russia for its year-long invasion of Ukraine, White House spokesperson Karine Jean-Pierre said. (RTRS)
RUSSIA: Russian oil export revenues are set to rise in March as falling freight rates and strong demand pushes Russian oil prices towards a $60 per barrel Western price cap, based on traders’ and Reuters’ calculations, challenging the view that the mechanism was increasing pressure on Moscow. (RTRS)
SOUTH AFRICA: South African Finance Minister Enoch Godongwana ruled out introducing a new fiscal anchor in the country’s budget framework as he seeks to contain rising debt. (BBG)
SOUTH AFRICA: South Africa’s state power utility appointed Chief Financial Officer Calib Cassim as interim chief executive officer, two days after the early departure of the company’s former boss. (BBG)
SOUTH AFRICA: Eskom Holdings SOC Ltd. Chairman Mpho Makwana said outgoing Chief Executive Officer Andre de Ruyter behaved “reprehensibly” when he made accusations of theft and corruption within the state-owned electricity company. (BBG)
ENERGY: Germany would be fine with a Europe-wide ban on Russian gas, but other countries would not, meaning it was better to focus on sealing gaps in the sanctions regime rather than expanding it, Economy Minister Robert Habeck said. (RTRS)
CHINA
ECONOMY: January data on domestic consumption shows the recovery is on track and all parties are confident in the market rebound for this year, according to a statement made by China’s Ministry of Commerce. (MNI)
FISCAL: Provincial data shows investment in major projects around China are off to a strong start in 2023 and will play an important foundation in the economic recovery this year, according to Sheng Chaoxun, (MNI)
FISCAL: Policies designed to stabilise growth following the pandemic may increase pressure on local fiscal balances and lead to further risks of hidden debt at regional level, according to analysts interviewed by the Securities Times. (MNI)
CHINA MARKETS
PBOC NET DRAINS CNY365 BILLION VIA OMOS FRIDAY
The People's Bank of China (PBOC) conducted CNY470 billion via 7-day reverse repos on Friday, with the rates unchanged at 2.00%. The operation has led to a net drain of CNY365 billion after offsetting the maturity of CNY835 billion reverse repos today, according to Wind Information.
- The operation aims to keep banking system liquidity stable towards the end of month, the PBOC said on its website.
- The 7-day weighted average interbank repo rate for depository institutions (DR007) fell to 2.0376% at 9:26 am local time from the close of 2.1766% on Thursday.
- The CFETS-NEX money-market sentiment index closed at 46 on Thursday, compared with the close of 42 on Wednesday.
PBOC SETS YUAN CENTRAL PARITY AT 6.8942 FRI VS 6.9028 THURS
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.8942 on Friday, compared with 6.9028 set on Thursday.
OVERNIGHT DATA
JAPAN JAN CPI +4.3% Y/Y; MEDIAN +4.3%; DEC +4.0%
JAPAN JAN CPI EXCLUDING FRESH FOOD +4.2% Y/Y; MEDIAN +4.3%; DEC +4.0%
JAPAN JAN CPI EXCLUDING FRESH FOOD & ENERGY +3.2% Y/Y; MEDIAN +3.3%; DEC +3.0%
JAPAN JAN NATIONWIDE DEPARTMENT STORE SALES +15.1% Y/Y; DEC +4.0%
JAPAN JAN TOKYO DEPARTMENT STORE SALES +19.6% Y/Y; DEC +8.0%
UK FEB GFK CONSUMER CONFIDENCE-38; MEDIAN -43; JAN -45
MARKETS
US TSYS: Marginally Richer In Asia
TYH3 deals at 111-15+, +0-01+, a range of 0-06 has been observed on volume of ~118K.
- Cash Tsys sit flat to 2bps richer across the major benchmarks, the curve flattened.
- Tsys largely tracked gyrations in JGBs as BOJ Governor Nominee Ueda faced parliament, an early bid spilled over seeing TY briefly look through yesterday's high.
- There was little follow through and Tsys retreated off best levels, dealing in a narrow range for the remainder of the session.
- BOJ Governor Nominee Ueda's comments were balanced, noting that there was no need for an immediate policy adjustment whilst also flagging the conditions that would facilitate the need for such a move in the future which capped gains in JGBs.
- BOJ-aside little meaningful macro headline flow crossed.
- The NY docket consists of a slew of U.S. data, including personal income/spending, PCE deflator, UofMich consumer sentiment (final) and new home sales. There a number of Fed speakers scheduled to cross, Fed Gov Waller is the highlight.
JGBS: Ueda Sticks To The Middle Lane, Supporting JGBs
JGBs sit just off best levels at the close, with futures +30 and cash JGBs running 0.5-4.0bp richer, with 20s presenting the firmest point on the curve. 10-Year JGB yields have dealt pretty much spot on the BoJ’s 0.50% YCC limit all day. Swap rates are 0.5-6.0bp lower, with swap spreads tightening across the curve.
- A lack of overt hawkish rhetoric in BoJ Governor-in-waiting Ueda’s initial nomination hearing allowed an early bid to extend. All in, Ueda seemed quite Kuroda-esque, stressing the need for continued monetary easing, with the initial impulse tempered by a hat tip towards the conditions that would facilitate the need for policy tweaks and an acknowledgement of the side effects of prolonged monetary easing.
- The nominees for the two BoJ Deputy Governor roles, Uchida & Himino, were also balanced, largely reflecting matters and ideas portrayed in Ueda’s speech, while Uchida pointed to methods to deal with the side effects of elongated policy easing, outside of an exit from easy policy.
- When it comes to the handover from the old BoJ leadership to the new there is seemingly a continued focus on generating wage growth to promote sustainable demand-pull inflation, in a bid to meet the BoJ’s inflation goal on a sustainable basis.
- National core CPI readings provided 0.1ppt misses in January, although all three of the major readings moved to fresh Y/Y cycle highs (Ueda suggested inflationary pressures would likely start to fade from February).
- Ueda, Himino & Uchida will appear in front of the upper house of parliament in their second round of confirmation hearings on Monday, with BoJ Rinban operations also slated.
JGBS AUCTION: Liquidity Enhancement Auction For OTR 5- To 15.5-Year JGBs Results
The Japanese Ministry of Finance (MOF) sells Y498.3bn of 5- to 15.5-Year JGBs in a liquidity enhancement auction:
- Average Spread: -0.019% (prev. -0.002%)
- High Spread: -0.017% (prev. +0.001%)
- % Allotted At High Spread: 49.4514% (prev. 20.3101%)
- Bid/Cover: 3.444x (prev. 4.672x)
JGBS AUCTION: 3-Month Bill Auction Results
The Japanese Ministry of Finance (MOF) sells Y5.12513tn 3-Month Bills:
- Average Yield -0.1418% (prev. -0.1526%)
- Average Price 100.0381 (prev. 100.0410)
- High Yield: -0.1303% (prev. -0.1358%)
- Low Price 100.0350 (prev. 100.0365)
- % Allotted At High Yield: 58.8551% (prev. 58.4803%)
- Bid/Cover: 3.578x (prev. 3.225x)
AUSSIE BONDS: BOJ Talk & Well-Digested Supply Assists Mid-Session Reversal
Early weakness gives way to a bull flattening of the curve with YM +3.0 and XM +6.0 at the close. A JGB-inspired bid for ACGBs builds over the session, aided by U.S Tsys strength, leaving bonds 3-6bp stronger. Firm demand at the latest ACGB Nov-29auction wouldn't have done the bid any harm. 3/10 cash curve closes -2bp.
- AU/US cash yield differential closes at -3bp after touching flat early.
- Swaps, mirroring bonds, close at the day’s high with rates 2-6bp lower and the curve 3bp flatter.
- Bills are +1-4bp led by the reds.
- Subdued trading in RBA-dated OIS leaves pricing little changed on the day with a 95% chance of a 25bp hike priced for the March meeting and terminal rate pricing around ~4.28%.
- Next week sees the local calendar deliver a batch of quarterly partial releases leading up to the release of Q4 GDP on Wednesday. With WPI’s undershoot sparking an ACGB rally this week, the market will give the National Accounts’ Compensation of Employees measure a cursory glance to see if it tells a similar story. Monthly reads on January Retail Sales and Private Sector Credit are also due early in the week.
- Also on the calendar next week is the AOFM’s now standard issuance of A$1.5bn of ACGBs, split between A$300mn of ACGB May-47 on Monday & A$1.2bn of Nov-32 on Wednesday.
AUSSIE BONDS: ACGB Nov-29 Auction Results
The Australian Office of Financial Management (AOFM) sells A$600mn of the 2.75% 21 November 2029 Bond, issue #TB154:
- Average Yield: 3.7610% (prev. 3.5318%)
- High Yield: 3.7625% (prev. 3.5350%)
- Bid/Cover: 3.2917x (prev. 4.3114x)
- Amount allotted at highest accepted yield as a percentage of amount bid at that yield 6.3.9% (prev. 14.9%)
- Bidders 40 (prev. 38), successful 12 (prev. 17), allocated in full 10 (prev. 11)
AUSSIE BONDS: AOFM Weekly Issuance Slate
The AOFM has released its weekly issuance slate:
- On Monday 27 February it plans to sell A$300mn of the 3.00% 21 March 2047 Bond.
- On Tuesday 28 February it plans to sell A$100mn of the 0.75% 21 November 2027 Indexed Bond.
- On Wednesday 1 March it plans to sell A$1.2bn of the 1.75% 21 November 2032 Bond.
- On Thursday 2 March it plans to sell A$1.0bn of the 26 May 2023 Note, A$1.0bn of the 21 July 2023 Note & A$1.0bn of the 11 August 2023 Note.
NZGBS: Selling Fatigue Sets In
NZGBs stage a sharp mid-session reversal after a 3-day weakening comes to an end. NZ Treasury comments, reinforced by the RBNZ Meeting and its subsequent communique, had managed to bring the cumulative rise in the 2-year yields this week to 35bp at the session’s cheaps. The 10-year yield had a similar rise fuelled by the threat of future NZGB supply. With the NZ-AU 10-year yield differential 30bp wider on the week domestic factors were clearly the dominant driver.
- It was however clear that selling fatigue had set in mid-session when hawkish comments from RBNZ Deputy Governor Silk were unable to hold yields at their highs. Silk stated that all options were on the table at the April meeting (25bp, 50bp or 75bp, but not a pause) and that the bank’s forecast for the peak cash rate “was not set in stone”.
- NZGBs close -1 to -3bp with the curve 2bp more inverted.
- Swaps underperformed bonds with the 2-year rate 4bp higher and the 2s10s curve 4bp more inverted.
- RBNZ dated-OIS closed unchanged with pricing for the April meeting at 39bp of tightening and terminal OCR at 5.46%.
- After this week's rise in yields, the market was clearly too complacent going into the RBNZ meeting. Today’s mid-session reversal suggests the market needs to catch its breath. Next week’s Antipodean data drop however threatens to make it a brief pause.
EQUITIES: Japan Outperforms, HK Tech Back Below 200-Day MA
(MNI Australia) Regional equities are a mixed bag today. Japan stocks have outperformed as Ueda's confirmation hearing took place. China and HK equities have continued to weaken though. US futures are modestly lower, but ranges have been tight overall, ahead of key US inflation data later.
- The Nikkei 225 is tracking +1.15% higher at this stage. New BoJ Governor nominee Ueda struck a balanced tone, with no shocks relative to market expectations. USD/JPY dips were generally supported, with Ueda not hinting at any imminent policy shifts.
- The HSI is off around 1.20% at this stage, with the tech sector down 2% at this stage and the index is tracking below its 200-day MA. Mixed earning results and greater competition concerns has clouded the tech backdrop this week.
- The CSI 300 also continues to correct lower, last down -0.90%. On-going tensions with the US, reflecting both Taiwan (potential for more US troops to be based there, although Taiwan officials denied this) and Ukraine issues (extent of alleged China support) are likely weighing at the margin as well.
- The Kospi (-0.50%) and Taiex (-0.25%) are both lower as well. Thailand stocks remain underperformers, down 1% at one stage. Offshore investors continue to sell Thai stocks (nearly $1bn in outflows in Feb to date).
GOLD: Support Evident Around $1820 Ahead Of Key US Data
Gold is modestly higher so far today, tracking +0.20%, to be back around the $1825.70 region. This would be the first daily gain in the precious metal since the end of last week. At this stage we are still -0.90% lower for the week.
- Some support is evident sub the $1820 level, which we saw on Thursday's session. This level was also a support point on Feb 17, so is likely to be eyed in the near term, particularly with further key US data out later today (PCE deflator and U. of Mich Sentiment).
- Gold continues to track broader USD indices closely, while gold ETF holdings remain on a downtrend.
OIL: Brent Support Evident Ahead Of $80/bbl, Holding Steady In Terms Weekly Change
Brent crude has continued to recover today, last near $83.00/bbl. This puts us +0.95% above NY closing levels and follows Thursday's +2% gain. Support appears evident for Brent around the $80/bbl level, as we haven't spent much time below this level in February. Brent is close to unchanged versus closing levels from last week. For WTI, we are back above $76.00/bbl.
- Overall, oil trends still look to be in somewhat of a holding pattern. Dips broadly remain supported, while prompt spreads continue to suggest tightness from a supply point.
- This is a little at odds with the continued rise in US inventory levels though.
- The market may also be waiting for greater clarity around the China outlook/policies from the upcoming National People's Congress.
- From a technical standpoint, the 20 and 50-day EMAs are above ($83.70 & $84.3), but arguably we need to break above the 100-day ($86.70) to form a more constructive outlook.
- Outside of tonight's US data (PCE and U. Of Mich Sentiment) next week EU energy ministers hold an informal meeting on Monday energy security. Then on Tuesday Internation Energy Week kicks off from London. Wednesday sees China PMIs for Feb.
FOREX: Yen Volatile On Ueda Comments, Limited Ranges Elsewhere
Yen was volatile as BOJ Governor-Nominee Ueda appeared before the parliament, USD/JPY was dealt in ~100 pip range however Ueda was ultimately balanced in his commentary and the pair sits unchanged from yesterday's closed levels.
- USD/JPY prints at ¥134.65/70. As Ueda was speaking the JPY initially pressured before paring gains and firming in a volatile trade. Ultimately USD/JPY found support ahead of ¥134.00 and the pair firmed to sit at current levels.
- Kiwi marginally outperformed its G-10 peers, however there was little follow through on moves and NZD/USD continues to observe narrow ranges as it consolidates above $0.62. A large option expiry ($940mn) at $0.6250 may cap gains today. Early in the session RBNZ Assistant Gov Silk noted that there are still upside risks to inflation, the forecast terminal rate is not “set in stone” and all rate hike options are on the table for April meeting.
- AUD/USD is a touch firmer, last printing at $0.6810/15. Westpac lifted their terminal rate call to 4.1% from 3.85%, with 25bp hikes now seen in March, April and May.
- Weakness in CNH may also be capping gains in the Antipodeans. USD/CNH is ~0.4% firmer and dealing a touch below 6.94, onshore equities are lower as US-Sino tensions weigh.
- Elsewhere EUR and GBP are flat, with narrow ranges observed.
- Cross asset flows are mixed, US Equity Futures are a touch lower and BBDXY is marginally firmer. 10 Year US Treasury Yields are ~2bps lower.
- In Europe today GDP data from Germany provides the highlight. Further out we have a slew of U.S. data including personal income/spending, PCE deflator, U. of Mich consumer sentiment and new home sales. There are also a number of Fed speakers scheduled to cross.
FX OPTIONS: Expiries for Feb24 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0535-50(E1.9bln), $1.0560(E548mln), $1.0600(E627mln), $1.0680-00(E2.7bln)
- USD/JPY: Y134.00($678mln), Y134.50($1.5bln)
- GBP/USD: $1.1950-52(Gbp510mln), $1.2200-10(Gbp644mln)
- AUD/USD: $0.6750(A$1.4bln), $0.6790-00(A$822mln)
- USD/CAD: C$1.3485-00($1.1bln)
- USD/CNY: Cny6.7000($1.6bln), Cny6.7180($1.4bln)
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 24/02/2023 | 0700/0800 | *** |  | DE | GDP (f) |
| 24/02/2023 | 0700/0800 | * | | DE | GFK Consumer Climate |
| 24/02/2023 | 0745/0845 | ** |  | FR | Consumer Sentiment |
| 24/02/2023 | 0800/0900 | ** |  | SE | Economic Tendency Indicator |
| 24/02/2023 | 0800/0900 | ** |  | ES | PPI |
| 24/02/2023 | - |  | EU | ECB Lagarde & Panetta at G20 Finance Minister Meet | |
| 24/02/2023 | 1330/0830 | ** |  | US | WASDE Weekly Import/Export |
| 24/02/2023 | 1330/0830 | ** | | US | Personal Income and Consumption |
| 24/02/2023 | 1500/1000 | *** | | US | New Home Sales |
| 24/02/2023 | 1500/1000 | *** | | US | Final Michigan Sentiment Index |
| 24/02/2023 | 1515/1015 | | US | Fed Governor Philip Jefferson | |
| 24/02/2023 | 1515/1015 | | US | Cleveland Fed's Loretta Mester | |
| 24/02/2023 | 1600/1100 |  | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 24/02/2023 | 1630/1130 | | US | St. Louis Fed's James Bullard | |
| 24/02/2023 | 1630/1630 |  | UK | BOE Tenreyro Panellist at NY Fed | |
| 24/02/2023 | 1830/1330 | | US | Boston Fed's Susan Collins | |
| 24/02/2023 | 1830/1330 | | US | Fed Governor Christopher Waller |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.