MNI EUROPEAN OPEN: Yen Falters Post Ueda Comments

US TSYS: Treasuries Unchanged, Fed's Williams See No Urgency To Cut Rates

• Jun'24 10Y futures have traded sideways today making highs of 110-15+ and lows of 110-11, and now trade unchanged at 110-14, ranges remain well within Thursdays. Initial resistance holds at 110-26+ (20-day EMA), a break above here will open 110-08 (50-day EMA), while initial support remains at 109-25+ (Low Feb 23) a break here opens a move to 109-14+ (Nov 28 Low)
• Curves are bull flattening yield are currently +0.05bp to -0.5bps across the curve, the 2Y yield +0.5bp higher at 4.625%, 10Y +0.2bp higher at 4.252% while the 2y10y is -0.425 at -37.527
• The NY Fed President John Williams spoke earlier where he said we don't need to tighten monetary policy any further and expects the Fed to cut interest rates later this year. See MNI's coverage of he speech here.• Earlier the Short-term funding bill passed senate and now sits with Biden.
• Looking ahead: S&P Global US Manufacturing PMI, U. of Mich. Sentiment, Construction Spending, ISMs & Fed Speakers

JGBS: Subdued Session, Local Data Not Market Moving Today, Heavy Calendar On Monday

In the Tokyo afternoon session, JGB futures are slightly higher, +2 compared to the settlement levels, after relatively subdued dealings.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined labour market and Jibun Bank PMI Mfg data, and comments from BoJ Governor Ueda.
• (Bloomberg) -- Bank of Japan Governor Kazuo Ueda said the Bank of Japan’s price target is not yet in sight, tempering market speculation that the bank’s first rate hike since 2007 is just around the corner. (See link ICYMI)
• Cash tsys are dealing flat to 1bp richer in today’s Asia-Pac session after Fed Williams said in a Fireside Chat after the US market close that he doesn’t believe the Fed needs to tighten monetary policy further. He added that he expects to cut interest rates later this year.
• Cash JGBs are cheaper out to the 10-year and slightly richer beyond. The 5-year zone is the underperformer on the curve, with its yield 1.6bps higher. The benchmark 10-year yield is 1.1bp higher at 0.720% versus the Nov-Dec rally low of 0.555% and the February high of 0.772%.
• Swaps are slightly richer, with swap spreads mostly tighter.
• On Monday, the local calendar sees Capital Spending, Company Profits and Monetary Base data, along with BoJ Rinban operations covering 1-3-year and 10-25-year+ JGBs.

AUSSIE BONDS: Little Changed, Light Local Calendar, Heavy Data Calendar On Monday

ACGBs (YM flat & XM +1.0) are slightly richer after dealing in relatively narrow ranges in today’s Sydney session. Today’s data drop (Judo Bank PMI Mfg and CoreLogic House Prices) failed to be market-moving.

• Cash tsys are dealing flat to 1bp richer in today’s Asia-Pac session after Fed Williams said in a Fireside Chat after the US market close that he doesn’t believe the Fed needs to tighten monetary policy further. He added that he expects to cut interest rates later this year.
• Cash ACGBs are flat to 1bp richer, with the AU-US 10-year yield differential 2bps higher at -12bps.
• ACGB May-34 went smoothly with more demand present. The cover ratio moved higher to 3.6437x from 3.1125x at the February auction. The weighted average yield printed 1.28bps through prevailing mids (per Yieldbroker).
• Swap rates are flat to 1-2bps lower.
• The bills strip is little changed.
• RBA-dated OIS pricing is little changed across meetings. A cumulative 37bps of easing is priced by year-end.
• On Monday, the local calendar sees the Melbourne Institute Inflation Gauge, Q4 Inventories, Q4 Company Operating Profits, ANZ-Indeed Job Advertisements and Building Approvals data.

NZGBS: Subdued Session After A Robust Post-RBNZ Rally

NZGBs ended the day flat to 1bp cheaper, reflecting a subdued local session. However, it has been a robust week for NZGBs, as yields closed 10-20bps lower than Tuesday's closing levels following the RBNZ's dovish shift. The 2/10 curve is approximately 10bps steeper than Tuesday's level.

• Moreover, NZGBs have outperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials around 5bps tighter than Tuesday's closing levels.
• Swap rates closed 1-3bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed flat to 1bp softer across meetings. A cumulative 53bps of easing is priced by year-end from an expected OCR peak of 5.53%.
• Before Wednesday's decision, the market had attached a 29% chance of a 25bp hike at yesterday’s meeting, with an anticipated terminal OCR of 5.65% (reflecting a 61% probability of a 25bp hike) by the May meeting. A cumulative 40bps of easing by year-end had been factored into the pricing.
• It is also worth noting that in late December, the market had expected over 100bps of easing by year-end, stemming from an anticipated terminal OCR of 5.53%.
• Next week, the local calendar sees Terms of Trade data on Monday.

FOREX: Yen Weakens Post Ueda Comments, Modest Risk On Elsewhere

The USD index has tracked tight ranges in the first part of Friday trade, the BBDXY last near 1244, which is close to end levels from NY on Thursday. This has masked some divergent trends within the G10 space though, with a risk on tone amid JPY and CHF underperformance.

• Early doors we had comments from BoJ Governor Ueda (in Brazil for the G20). These were cautious/less hawkish compared to remarks by Board member Takata that were made yesterday. The governor noted the inflation goal is not yet in sight and that current spring wage negotiations were key to ensuring a sustainable wage/inflation outlook.
• USD/JPY didn't react initially, but rose later to 150.40 (after opening around 150.00), this is a 0.30% yen loss and puts us back close to levels that prevailed before Takata headlines crossed yesterday.
• A turnaround in US equity futures, which now sit +0.10-0.20% higher has likely weighed on the yen as well. US yields are close to flat at this stage. Comments from the Fed's Williams haven't impacted sentiment greatly.
• AUD/USD sits back near 0.6510, close to 0.20% higher. The firmer equity backdrop has helped, while iron ore prices sit back above earlier lows in the week. (last near $117.2/ton). The AUD/NZD cross has been unable to re-take the 1.0700 handle.
• For NZD/USD, we are off the lows from earlier this morning, trading again in very tight ranges of 20pips (last 0.6090/95. Earlier RBNZ Gov Orr gave a speech in Christchurch, largely reiterating what was mentioned earlier this week at the RBNZ OCR meeting.
• CHF was a weaker performer through Thursday trade, and it has lagged softer USD trends elsewhere. EUR/CHF tested above it 200-day MA for the first since June, but has seen little follow through. The pair was last near 0.9565.
• Looking ahead, Eurozone CPI then takes centre stage before US ISM Manufacturing PMI rounds off the week’s tier-one data.

ASIA EQUITIES: Hong Kong Equities Reverse Earlier Losses, China Equities Steady

• Hong Kong equities are mostly higher and out-performing today after initially opening down 0.5-2% lower. Property is the worst performing sector, opening down 1.30% before paring losses however heading into the break sold off again to be down 0.85%. HSTech is the best performer up 1.60%, while the HSI is up 0.75%
• China mainland equities have been less volatile today, with the CSI1000 trading flat, while the CSI300 is up 0.30%.
• China Northbound flows were +16.6b yuan on Wednesday, highest since July 2023, with the 5-day average now 5.75b, while the 20-day is at 3.66b yuan.
• China’s home sales slump dragged on in February, even as regulators stepped up efforts to salvage the beleaguered property market, with the value of new home sales sliding 60% from a year earlier.
• It was reported on Thursday that the US will be investigating security risks associated with Chinese Electric Vehicles and other internet-connected cars. It should be noted that Chinese auto companies have a 27.5% tariff imposed on them, so penetration in the US market is limited; however, this would further dampen hopes of growth in the region.
• Earlier, China's February Non-Manufacturing PMI was 51.4 vs 50.7 est, while February Manufacturing PMI was 49.1 vs 49.0 est.
• Looking ahead, Hong Kong Retail Sales at 4:30 pm local time.

ASIA PAC EQUITIES: Asian Equities Push Higher, As Tech Names Out-Perform

Regional Asian Equities have mostly followed US stocks higher today after strong month-end flows and US inflation data put investors at ease. Japan is the best performer in the region, while South Korea is out for Independence day

• Japan equities are higher today, following wider markets after the US index closed at records highs as Tech names led the move. The BoJ Governor Kazuo Ueda was out earlier saying that price goals are not yet in sight, while he will be closely watching wage data. In local markets Tokyo Electron contributed the most to the index up 1.5%, with the Topix up 1.18%, while the Nikkei 225 trades up 1.95% led by tech names.
• South Korean markets are closed today for Independence Day
• Taiwan Equities are slightly lower today, Taiex Down 0.10%, after initially trading up 0.20%. TSMC is the biggest contributor to the market after the Philadelphia Stock Exchange Semiconductor Index pushed 2.70% higher on Thursday. Foreign equity flows are slowing with just $3.1 flowing into the market on Thursday.
• Australian equities have followed US equities higher and officially enter a bull market after rallying 20% off the June 2022 lows. Strong corporate earnings have helped push the market higher with Life 360 the standout today, up 36% on expansion plans. The ASX200 closed 0.53% higher.
• Indian Equities have surged higher today and the most in almost a month after data showed the economy grew at a faster pace than expected in the last quarter, the Nifty 50 is 1% higher today.
• Elsewhere in SEA, NZ equities have reversed earlier losses to trade unchanged, while Indonesian equities continue to see outflows with another $40.75m, with equities down 0.60%.

OIL: Within Recent Ranges, But Up For The Week

The first part of the Friday session has seen oil benchmarks firm modestly. The active Brent contract (K4) was last near $82.20/bbl, up around 0.35% for the session so far. We are tracking around 1.7% higher for the week at this stage. The active WTI contract is near $78.50/bbl, up around 2.6% for the week so far.

• News flow around oil has been light so far today. BBG noted that major China buyers ramped up derivative related activity, which helps price benchmarks (see this link). Broader risk appetite has been firmer in the equity space, which has likely helped oil at the margin.
• Earlier we had China PMI data, which was slightly better than expected, although the manufacturing index remain comfortably in contraction territory. There are some signs that we may a better next month.
• Elsewhere, US President Biden when asked on the prospect of an Israel-Hamas ceasefire agreement says that 'hope springs eternal,' but that it is unlikely to start by Monday 4 March (previously raised by Biden as a target date).
• Wires also carried comments from the leader of the Houthi forces in Yemen, claiming that the group will introduce military "surprises" in their Red Sea operations, which their "enemies" will not expect.
• For Brent, we remain within recent ranges. Late Jan highs at $83.65/bbl remains the upside focus, while recent lows rest near $80/bbl.

GOLD: Pushes To A Three-Week High After PCE Deflator Data

Gold is slightly higher in the Asia-Pac session, after closing 0.5% higher at $2044.30 on Thursday.

• Bullion rose to a three-week high after inflation figures matched expectations and reinforced bets that the Federal Reserve won’t need to raise interest rates again.
• US Treasuries finished the NY session 1-2bps richer. The US 10-year yield finished 1bp lower at 4.26% after pushing as high as 4.32% ahead of the PCE deflator data.
• The US PCE deflator, which is the Fed’s preferred inflation gauge, printed in line with market expectations, with the core measure up 0.4% m/m and 2.8% y/y. This confirmed the jump in inflation in January, as foreshadowed by prior CPI and PPI data.
• Fed speak remained balanced while leaning toward cut(s) in 2H'24. Fed Bostic reiterated that the central bank is likely going to be in a position to begin easing interest rates sometime in the summer.
• According to MNI’s technical team, Thursday’s high of $2050.72 cleared resistance at $2041.1 (Feb 23 high) and opened the key level of $2065.5 (Feb 1 high).