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
- MNI POLICY: BOJ SEES BANKS COPING WELL AS YIELD CONTROL EASED
- MNI BOK WATCH: RATE TO HOLD AT 3.5%; 2024 EASING IN FOCUS
- SOFTBANK’S ARM FILED FOR BIGGEST IPO OF YEAR WITH EYE ON AI - BBG
- S&P JOINS MOODY’S IN CUTTING US BANKS AMID ‘TOUGH’ CLIMATE - BBG
- CHINA RAMPS UP FIGHT WITH YUAN BEARS TO STOP SELLOFF SPIRALING - BBG
Fig. 1: US Nominal 10-Year & 2-Year Government Bond Yields
Source: MNI - Market News/Bloomberg
U.K.
JOBS: Britain has received a surge in job searches from overseas during the past year, partly reflecting a post-Brexit relaxation in work visa rules for non-European Union nationals, figures from recruitment website Indeed showed on Tuesday. (RTRS)
U.S.
POLITICS: Donald Trump said he’d surrender Aug. 24 at the Fulton County Jail in Atlanta, to be booked on state charges that he criminally conspired to overturn the results of the 2020 presidential election. (BBG)
POLITICS: Donald Trump will face a $200,000 bond and orders not to send threatening social media messages as the former U.S. president awaits trial in Georgia on charges of trying to overturn his 2020 election loss, a court filing on Monday showed. (RTRS)
POLITICS: Former U.S. President Donald Trump holds a commanding lead over his Republican rivals in the state of Iowa, where the party's presidential nominating contest begins in January, according to an opinion poll released on Monday. (RTRS)
GOVERNMENT: The House Freedom Caucus raised the risk of an Oct. 1 US government shutdown with demands for spending cuts and conditions on money for Ukraine in exchange for their support of stopgap spending legislation. The demands, made Monday by several dozen conservatives, would face strong Democratic opposition and threaten to sink a so-called continuing resolution that leaders in both parties have said will be necessary to avert a partial shutdown after the current fiscal year ends Sept. 30. (BBG)
RATINGS: Two weeks after Moody’s Investors Service rattled financial stocks by cutting the ratings for a slew of US banks, S&P Global Ratings is downgrading and dimming its outlook for several more — citing a similar mix of pressures making life “tough” for lenders. (BBG)
US/CHINA: The US lifted restrictions on 27 Chinese companies and organizations, a sign Washington is extending an apparent olive branch ahead of Commerce Secretary Gina Raimondo’s planned trip to Beijing this month. The US Department of Commerce on Monday removed the Chinese entities — such as chemical firm and lithium battery material maker Guangdong Guanghua Sci-Tech Co., and sensor maker NanJing GOVA Technology Co. — from its “unverified list,” which restricts a company’s ability to buy American technology. (BBG)
OTHER
JAPAN: Japan said on Tuesday it will start releasing more than 1 million metric tonnes of treated radioactive water from the wrecked Fukushima nuclear power plant on Aug. 24, putting into motion a plan that has drawn strong criticism from China. (RTRS)
JAPAN: Japanese commercial banks will avoid taking big losses on government bond holdings as the Bank of Japan loosens its yield curve control framework by holding the securities to maturity as they rebalance their portfolios towards higher-yielding debt, BOJ analysis ahead of October’s Financial System Report shows. (MNI)
JAPAN: SoftBank Group Corp.’s Arm Holdings Ltd. took a step toward what’s set to become the biggest US initial public offering of the year, a bet that the once-obscure designer of phone chips can flourish in the era of artificial intelligence computing. (BBG)
AUSTRALIA: Australian consumer confidence stumbled last week in a possible reaction to a weakening of the Australian dollar which has come under pressure amid rising concerns about the outlook for China's economy. Consumer confidence decreased by 2.4 points last week, according to a survey by the ANZ Bank and pollster Roy Morgan. (BBG)
COMMODITIES: BHP Group Ltd., the world’s biggest miner, missed analysts’ forecasts as its full-year profit slumped, with China’s struggling economy weighing on demand for iron ore and other commodities. (BBG)
SOUTH KOREA: The Bank of Korea is likely to keep its policy rate unchanged at 3.50% for a fifth consecutive meeting on Thursday as concern shifts from inflation to the slowing economy. The BOK will likely keep the rate at 3.5% for the remainder of 2023 due to heightened uncertainty and high core inflation, said a person familiar with South Korea’s economy and monetary policy. "The focus is whether the bank will move toward easing at the end of this year or the beginning of 2024,” he added. (MNI)
NORTH KOREA: North Korea plans to launch a satellite later this month, according to Japanese media, firing off a space rocket as South Korea and the US conduct joint military drills that have riled Pyongyang. (BBG)
CHINA
MORTGAGE RATES: Authorities will likely expedite the process of cutting the interest rates of existing mortgages following Monday’s surprise moves by local banks on their benchmark lending rates, according to a Securities Daily article Tuesday, citing analysts. (BBG)
LOCAL GOVERNMENT: Local governments in some Chinese cities owe some private developers 1 billion yuan ($140 million) to 2 billion yuan each, which includes tax and fee reimbursement, Economic Observer reports, citing unidentified executives at developers. (BBG)
US/CHINA: China can jointly safeguard international trade rules and ensure the stability of global supply chains with the US, according to Premier Li Qiang. Li, speaking at a US-China Business Council event, said China would continue opening up and demonstrate global responsibility as a major country. Policymakers would continue to expand market access for foreign firms, promote fair competition and protect IP rights, Li said. (21st Century Business Herald)
MARKETS: Share buybacks spurred by policy support may help to halt the downward trajectory of the A-share market. According to Wind, in the month to Aug 21, at least 151 listed companies have issued share repurchase announcements. A wave of buybacks may signal the market has bottomed as listed companies and financial institutions buy low. (21st Century Business Herald)
YUAN: China extended two lines of yuan defense, pushing up funding costs in the offshore market to squeeze shorts while battling with a stronger-than-expected reference rate for the managed currency. (BBG)
CHINA MARKETS
MNI: PBOC Net Drains CNY93 Bln Tuesday via OMO
The People's Bank of China (PBOC) conducted CNY111 billion via 7-day reverse repos on Tuesday, with the rates unchanged at 1.80%. The operation has led to a net drain of CNY93 billion after offsetting the maturity of CNY204 billion reverse repo today, according to Wind Information.
- The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.
- The 7-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8091% at 09:37 am local time from the close of 1.8857% on Monday.
- The CFETS-NEX money-market sentiment index closed at 42 on Monday, the same as the close on Friday.
PBOC Yuan Parity Higher At 7.1992 Tuesday Vs 7.1987 Monday
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1992 on Tuesday, compared with 7.1987 set on Monday. The fixing was estimated at 7.3103 by Bloomberg survey today.
MARKET DATA
SOUTH KOREA AUGUST CONSUMER CONFIDENCE 103.1; PRIOR 103.2
SOUTH KOREA 2Q HOUSEHOLD CREDIT KR1862.8T; PRIOR KRW1853.3T
MARKET
US TSYS: Losses Pared After TY's Fresh Cycle Low
TYU3 deals at 109-01, -0-01+, a 0-07 range has been observed on volume of ~84k.
- Cash tsys sit little changed across the major benchmarks.
- In early dealing on Tuesday tsys were pressured as participants perhaps looked ahead to Fed Chair Powell's speech at the Jackson Hole Symposium on Friday, a Bloomberg Market Pulse Survey noted that 80% of those surveyed said the speech will reinforce the message of a hawkish hold.
- TY printed a fresh cycle low at 108-28+ and the 10 Year Yield printed at 4.362% its highest level since 2007.
- The move lower did not follow through, tsys ticked away from session lows alongside pressure on the USD.
- There is a thin docket in Europe today, further out we have Existing Home Sales, Philadelphia Fed Non-Mfg Index and Richmond Fed Business Survey. Fedspeak from Richmond Fed President Barkin, Chicago Fed President Goolsbee and Gov Bowman cross.
JGBS: Futures Sit Just Above Session Lows, BoJ Gov Ueda & PM Kishida Discuss Financial Conditions
In the Tokyo afternoon session, JGB futures are dealing just above session lows, -11 compared to settlement levels.
- A thin local docket has left market participants on headlines and US tsys watch.
- US tsys sit little changed across the major benchmarks in Asia-Pac trading. The pivotal economic event of this week centres on the speech by Fed Chair Powell at the Jackson Hole gathering on Friday.
- Prime Minister Fumio Kishida and Bank of Japan Governor Kazuo Ueda met Tuesday to discuss financial conditions amid continued weakness in the yen and a rise in bond yields to the highest in nine years. (See link)
- The cash JGB curve bear steepens, with yields flat to 4.4bp higher (20-year).
- The 10-year JGB yield reached 0.665% on Tuesday, the highest since 2014, raising the prospect that the BoJ may come into the market with an unscheduled bond-buying operation to slow gains. (See link)
- The MoF’s Liquidity Enhancement Auction for OTR 5-15.5-Year JGBs sees weaker demand, with the cover ratio declining to 3.604x from 4.237x.
- The swaps curve has also bear steepened, with rates 0.1bp to 1.3bp higher. Swap spreads are narrower.
- Tomorrow the local calendar sees Jibun Bank PMI data for August (Preliminary), along with BoJ Rinban operations covering 1-5-year and 10-25-year JGBs.
AUSSIE BONDS: Cheaper, Narrow range, Tracking Tsys
ACGBs (YM -3.0 & XM -3.0) are weaker, after dealing in a relatively narrow range in the Sydney session. With the local calendar light today, local participants have been guided by US tsys.
- US tsys sit little changed across the major benchmarks in Asia-Pac trading. In early dealings on Tuesday US tsys were pressured as participants perhaps looked ahead to Fed Chair Powell's speech at the Jackson Hole Symposium on Friday. A Bloomberg Market Pulse Survey noted that 80% of those surveyed said the speech will reinforce the message of a hawkish hold.
- Cash ACGBs are 2-3bp cheaper, with the AU-US 10-year yield differential 2bp tighter at -5bp.
- Swap rates are 2bp higher, with EFPs 1bp tighter.
- The bills strip has bear steepened, with pricing -1 to -4.
- RBA-dated OIS pricing is little changed across meetings.
- Tomorrow the local calendar sees the only economic release of the week, namely Judo Bank’s PMI data.
- Tomorrow the AOFM plans to sell A$700mn of the 3.00% 21 November 2033 bond.
- (AFR) Retailers, builders and cafe owners are more likely than other company directors to default on their credit cards and home loans, missing payments to keep their embattled businesses afloat. (See link)
NZGBS: Closed On A Weak Note, Budget In Focus, Implied Swap Spreads Tighter
NZGBs closed on a weak note, with benchmark yields 9-10bp higher. A thin local data docket has left local participants on headlines and US tsys watch.
- Economic activity is slowing, broadly as anticipated in the Budget, with indicators of activity in July pointing to a sluggish start to the Q3, the Treasury Dept. says in Fortnightly Economic Update published Tuesday in Wellington. (See link)
- The RBNZ reports variation to the 2020-2025 funding agreement. Variation is to provide the additional funding required by the RBNZ to implement the new regulatory and supervisory regime under the recently enacted Deposit Takers Act. (See link)
- US tsys have ticked away from Asia-Pac session lows, with little macro newsflow crossing. US tsys are little changed across the major benchmarks.
- Swap rates are 5-7bp higher, with implied swap spreads 4bp narrower.
- RBNZ dated OIS 1-4bp firmer for meetings beyond Feb'24, with terminal OCR expectations at 5.71%.
- Tomorrow the local calendar sees Q2 Retail Sales Ex-Inflation on Wednesday. Spending appetites likely remained subdued through the June quarter. The softness in retail spending reflects that high inflation and interest rate rises have squeezed households' purchasing power.
EQUITIES: CHINEXT Back To May 2020 Lows, Positive Trends Elsewhere
Outside of China/HK equities, regional Asia Pac equity sentiment is mostly positive in Tuesday trade to date. Japan markets have been the strongest performers, with gains around 0.75%. Other markets are mostly seeing gains of around 0.50% at this stage. US equity futures sits slightly in the red. Eminis have largely been range bound, last near 4409. Nasdaq futures are also down a touch, last near 14968.5, but like Eminis largely holding onto gains from Monday's session.
- The Topix is +0.75% at this stage, while the Nikkei 225 is up by the same amount. Some excitement in the tech space is aiding sentiment, with spill over evident from the US Monday session and focus on Nvidia's earnings on Wednesday. The SoftBank Arm IPO is also generating some interest.
- China and Hong Kong equities were stronger in the first part of trade but had little follow through. At the break, the CSI 300 is down ~0.30%, after early gains of as much as 0.80%. The index is making fresh lows back to late November 2022. The CHINEXT index is back to May 2020 lows.
- The HSI is faring slightly better, up 0.16% at the break, but we opened around +1% higher.
- Tech related indices in terms of the Taiex (+0.45%) and Kospi (+0.40%) are modestly higher.
- In SEA, Indonesian and Thai stocks are the best performers, with both indices around 0.60% higher at this stage. Thai politics is in focus with the PM vote currently taking place and former PM Thaksin has returned from a 15yr exile.
FOREX: Greenback Marginally Pressured In Asia
The USD is marginally pressured in Asia today, the greenback has trimmed some of its recent gains and BBDXY now sits a touch above its 200-Day EMA. Ranges do remain narrow thus far on Tuesday and moves have been relatively limited thus far.
- Yen is a touch firmer, USD/JPY printed a low as news crossed that BoJ Governor Ueda will meet with Japan PM Kishida today however losses were pared and we now sit a touch above the ¥146 handle. Technically the uptrend in USD/JPY remains intact, resistance comes in at ¥146.56 (Aug 17 high) and ¥146.93 (8 Nov 22 high).
- Kiwi is up ~0.2%, last printing at $0.5935/40. NZD/USD does however remain well within recent ranges. Bulls look to regain the $0.60 handle to target the 20-Day EMA ($0.6039).
- AUD/USD is ~0.1% firmer sitting a touch above $0.6420. Resistance is at $0.6480 (high from Aug 16).
- Elsewhere in G-10 the Scandies are leading the bid, although liquidity is generally poor in Asia. EUR and GBP are both up ~0.1%.
- Cross asset wise; e-minis have erased early losses to sit little changed and the Hang Seng is a touch firmer. BBDXY is down ~0.1% last printing at 1238.30, the 200-Day EMA comes in at 1237.71. US Tsy Yields have trimmed early gains and sit unchanged across the curve.
- There is a thin docket in Europe on Monday.
OIL: Crude Down, WTI Breaks Below $80 Unsustained
Oil prices have been in a narrow range during APAC trading and are down marginally. WTI is currently around $80, and while it has broken below $80 a number of times today, it hasn’t been able to sustain the move. The intraday low was $79.92. Brent has held above $84 and is around $84.34/bbl. The USD index has trended lower and is down 0.1%.
- Oil has been under pressure from more positive supply news, despite the weaker greenback. Data is showing an increase in shipments from Iran and there are signs that the months-long dispute between Iraq and Turkey may be resolved (worth 500kbd).
- API US inventory data for last week is due to be released later. The previous week it showed crude stocks falling 6.2mn barrels, according to Bloomberg. In light of signs that supply is tightening, US inventory data is being monitored closely.
- In terms of LNG, Woodside has said that talks with unions have been “constructive” including “substantive” agreements on some items. There is the risk of industrial action as early as September 2. European gas prices rose 9.8% on Monday.
- Later the Fed’s Barkin, Goolsbee and Bowman speak and on the data front August Philly and Richmond Fed indices and July existing home sales print. Fed Chairman Powell speaks on Friday, which given demand concerns will be a key event for oil markets.
GOLD: Small Bounce On Monday As USD Weakens
Gold is little changed in the Asia-Pac session, after closing +0.3% at 1894.93 on Monday.
- A weakening in the USD index breathed some life into the yellow metal after touching a low of 1884.89. According to MNI's technicals team, support is seen at that the overnight low of $1884.9, whilst resistance is seen at $1920.7.
- Despite the overnight strengthening, bullion remained near a five-month low on increasing signs that US interest rates will need to stay higher for longer. On Monday, the US 10-year nominal and real yields rose to 4.35% and 2.0% respectively, marking their highest points since 2007 and 2009.
- The pivotal economic event of this week centres on the speech by Fed Chair Powell at the Jackson Hole gathering on Friday. The prevailing concern is that Powell might undermine investors' optimistic expectations, specifically the notion that the Federal Reserve has concluded its interest rate hikes and is poised to initiate rate cuts in the early months of the upcoming year.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 22/08/2023 | 0600/0700 | *** |  | UK | Public Sector Finances |
| 22/08/2023 | 0600/0800 | ** |  | NO | Norway GDP |
| 22/08/2023 | 0800/1000 | ** |  | EU | EZ Current Account |
| 22/08/2023 | 0900/1000 | * | | UK | Index Linked Gilt Outright Auction Result |
| 22/08/2023 | 1000/1100 | ** | | UK | CBI Industrial Trends |
| 22/08/2023 | - | * |  | FR | Retail Sales |
| 22/08/2023 | 1230/0830 | ** |  | US | Philadelphia Fed Nonmanufacturing Index |
| 22/08/2023 | 1255/0855 | ** | | US | Redbook Retail Sales Index |
| 22/08/2023 | 1400/1000 | *** | | US | NAR existing home sales |
| 22/08/2023 | 1400/1000 | ** | | US | Richmond Fed Survey |
| 22/08/2023 | 1530/1130 | * | | US | US Treasury Auction Result for Cash Management Bill |
| 22/08/2023 | 1830/1430 | | US | Chicago Fed's Austan Goolsbee | |
| 23/08/2023 | 2300/0900 | *** |  | AU | Judo Bank Flash Australia PMI |
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.