MNI EUROPEAN OPEN: Yen Rallies, BoJ's Takata Says Inflation Goal Within Sight

US TSYS: Treasuries Edge Lower Ahead Of US Data Later

• Jun'24 futures touched a early high of 110-14 on Asia open, but has only moved since then, touching a low 110-09 however still well within recent ranges. The trend direction in Treasuries is unchanged and remains down with the contract continuing to trade closer to its recent lows, taking a look at technical levels initial resistance holds at 110-28+ (20-day EMA), while initial support at 109-25+ (Low Feb 23).
• Treasury yields are giving up some of the moves lower from Wednesday, with yield curve 1-2bps higher. The 2Y yield is 1.4bp higher at 4.652%, the 10Y is 1.4bp higher at 4.278%, while the 2y10y is unchanged at -37.631
• There were a flurry of Fed Speaks on Wednesday with Atlanta Fed President Bostic remaining "comfortable" with a patient Fed strategy to address inflation, he still expects the first rate cut this summer. NY Fed President Williams reiterated the Fed has a "ways to go to sustained 2% inflation", while Boston Fed President Collins wants greater confidence in disinflation before soften policy
• Looking ahead: Personal Income/Spending, PCE, Jobless Claims & MNI Chicago PMI

JGBS: Bear-Steepener After BoJ Takata Comments, US PCE Deflator Due

JGB futures are holding weaker and close to session lows, -21 compared to settlement levels. The key driver of the move lower was comments from BoJ Board Member Takata. He sent a strong signal that the case for ending the negative interest rate policy is gaining momentum. (See link)

• JGB futures had earlier spiked higher after Industrial Production declined more than expected in January.
• The other domestic catalyst today was 2-year supply. The supply showed mixed demand metrics, as the low price failed to meet dealer expectations and the cover ratio declined. However, it is worth noting that today’s cover ratio was the second highest for a 2-year auction since July last year.
• Considering that today's auction took place with an outright yield at its highest level since 2011, the result highlights the impact that uncertainties surrounding the BoJ policy outlook are having on bond demand.
• Cash tsys are ~1bp richer in today's Asia-Pac session ahead of US PCE Deflator data later today.
• The cash JGB curve has bear-steepened, with yields 1-3bps higher. The benchmark 10-year yield is 1.7bps higher at 0.717%.
• The swaps curve has also bear-steepened, with rates 1-2bps higher. Swap spreads are little changed.
• Tomorrow, the local calendar sees Jobless Rate, Job-To-Applicant Ratio, Jibun Bank PMI Mfg and Consumer Confidence data.

AUSSIE BONDS: Richer, Mid-Range, Awaiting US PCE Deflator Data

ACGBs (YM +3.0 & XM +3.5) are richer but sit in the middle of today’s Sydney session ranges. Today’s mixed domestic drop (Retail Sales weaker, Capex Stronger and Private Sector Credit in line with expectations) failed to meaningfully move the market. At the time of writing, ACGB futures were 1-2bps weaker than pre-data levels.

• The Australian economy is facing a significant slowdown but will likely avoid a recession, Treasurer Jim Chalmers said on Thursday. Speaking from the G20 Finance Ministers and Central Bank Governors meetings in Brazil, he told the ABC that while inflation is falling in Australia, the country is "not immune" to weak global growth. (See link)
• Cash tsys are ~1bp richer in today's Asia-Pac session ahead of US PCE Deflator data later today.
• Cash ACGBs are 3-4bps richer, with the AU-US 10-year yield differential flat at -14bps.
• Swap rates are 3-4bps lower.
• The bills strip has bull-flattened further, with pricing flat to +4.
• RBA-dated OIS pricing is flat to 1bp softer across meetings. A cumulative 36bps of easing is priced by year-end.
• Tomorrow, the local calendar sees CoreLogic House Prices and Judo Bank PMI Mfg data.
• Tomorrow, the AOFM plans to sell A$800 million of 3.75% May-34 bond.

NZGBS: Slightly Richer As RBNZ Gov. Orr Shuts Door On Hike

NZGBs closed flat to 1bp richer and near the session’s best levels after RBNZ Governor Adrian Orr said policymakers had decided against raising interest rates this week because the latest data confirmed that inflation is slowing. (See link)

• (AFR) The RBNZ surprised pundits by appearing less inclined to raise interest rates further, sending the local currency and bond yields lower as traders sharply trimmed the chance of further tightening. (See link)
• Business Confidence lost -1.9 points from a month earlier in February to 34.7, according to ANZ. However, the Activity Outlook rose to 29.5 from 25.6 in January.
• Today’s weekly supply showed mixed results in terms of demand metrics. The May-28 and May-41 lines saw cover ratios of 2.6-2.7x, while the Apr-33 line showed 1.85x.
• Swap rates closed 3bps lower.
• RBNZ dated OIS pricing is 1-5bps softer across meetings today. This comes after late 2024 meetings shunted around 20bps softer yesterday following the RBNZ policy decision. A cumulative 74bps of easing is priced by year-end.
• Tomorrow, the local calendar sees CoreLogic House Prices, ANZ Consumer Confidence and Building Permits data, along with a speech from RBNZ Governor Orr to the Canterbury Chamber of Commerce.

FOREX: Yen Strengthens On BoJ Speech, A$ Higher, US PCE In Focus Later

Yen strength has been the main feature of G10 FX markets today. The BBDXY was last down a little over 0.1%, tracking close to 1242. AUD/USD is also higher, as is NZD, but the Kiwi has lagged somewhat.

• USD/JPY was drifting lower before BoJ Board member Takata spoke, but broke down through 150.00 on hawkish comments from the central banker. Most notably was reference to the price target finally coming into sight. References to current spring wage negotiations was also bullish.
• USD/JPY got to lows of 149.70, not too far from the 20-day EMA (near 149.63), but we now sit slightly higher at 149.85.
• AUD/USD has risen around 0.35%, last close to 0.6520. Firmer China equities have helped, although trends are mixed elsewhere in the region. Iron ore prices have also stabilized, last near $118/ton, up around 1.6%. Data was mixed with retail sales sub expectations, but capex slightly stronger. We didn't see an AUD reaction though.
• NZD/USD didn't react to the earlier data, and has remained in very tight ranges, although making new daily highs of 0.6104, if the pair is able to hold back above 0.6100 level, a further move higher wouldn't be unexpected after Wednesday's 1.20% move lower.
• AUD/NZD is edging higher as trading progresses today, nearing highs made during the US session on Wednesday (1.06857) to trade last at 1.0675/80.
• Looking ahead, the January PCE deflator will be the last reading of the Fed's preferred inflation gauge before the March FOMC meeting. Before this, regional inflation data from the Eurozone, including Germany, Spain and France is out.

ASIA STOCKS: HK & China Equities Higher Into Month End, CSRC To Restrict Quant Strategies

Hong Kong and China equities are higher today as investors after a decent sell-off on Wednesday driven by a crackdown on quants funds and their trading strategies, it has also been reported that a Top-performing Quant fund has been banned from the stock-index futures market for a year. Hong Kong Markets are lagging China Mainland equities in what could be due to disappointment in the Budget released on Wednesday. Month -end flows have been seen to help push markets higher today with Property and Growth stocks the top performers in the region.

• Equities markets are higher come out of the Asia break. Mainland Property Index is the top performer this morning up 0.90%, although the index was 3.80% lower Wednesday. HSTech Index in flat for the day, after Baidu's profits plunged 48% as AI costs hurt bottom line, while the wider HSI is up 0.15% led higher by Financials with HSBC up 1.50%. In China growth stock are leading the way higher, with the CSI1000 up 1.60%, after being up as much as 3.10%, while the CSI300 is 0.90% higher.
• China Northbound flows were +1.3b yuan on Wednesday, with the 5-day average now 3.1b, while the 20-day is at 2.81b yuan.
• JPM was earlier out recommending investors sell into any strength in Hong Kong Property Developers after the government announced it will be scrapping property curbs, as they view the easing will boost volumes, but home prices will continue their trend lower.
• China’s securities regulator (CSRC) will look to restrict Quant trading strategies that have been seen to be responsible for recent market turmoil, and guide funds in controlling the size and leverage of their DMA businesses.
• China banned a top-performing quant fund (Shanghai Weiwan Fund Management) from the stock-index futures market and vowed tighter oversight of high-speed trading, expanding a crackdown on computer-driven investment strategies that some have blamed for exacerbating market turmoil.
• Major companies with earnings due out today include Budweiser Brewing Co APAC, HK Exchanges & Clearing and NetEase. NetEase will be the most closely watch after they have recently had gaming content approved.
• Looking ahead, Hong Kong has Budget Balance & Money Supply data out.

ASIA PAC EQUITIES: Regional Asian Equities Rebound To Trade Mostly Higher

Regional Asian Equities have recovered from the lows of earlier to trade mixed to slightly higher. There hasn't been much in the way of market drivers or headlines so far today with markets largely following the moves from the US on Wednesday, tech stocks are the worst performers after US giants Nvidia and Apple traded lower overnight.

• Japan equities are now flat to slightly higher today, after previously being down about 0.50%. Tech stocks are the worst performers, with the Nikkei under-performing. Aozora Bank, who have been caught up with recent weakness from the US Commercial property space, surged higher today after Activist Investor Yoshiaki Murakami added positions in the company. Foreign investors sold ¥206b of Japanese stocks the first outflow for the year on Wednesday, while BoJ's Takata was out earlier with a hawkish tone, noting the price target is finally coming into sight, despite the economic uncertainty. Currently the Topix is up 0.10% while the Nikkei 225 is 0.10% lower.
• South Korean equities are lower today, after out-preforming the wider market on Wednesday on news that Zuckerberg had meet with the heads of LG and Samsung and discussed AI technology spurred the markets higher and helped attract foreign equity inflows with $473m coming in on Wednesday. Currently the Kospi is down 0.35%.
• Taiwan Equities were closed yesterday
• Australian equities are higher today, as markets pushed higher post Retail Sale missed estimate earlier today, markets now see higher chances of rate cuts earlier. The ASX200 closed up 0.50%.
• Elsewhere in SEA, NZ equities are lower today, down 0.20%, Indonesian equities saw positive foreign inflows on Wednesday, equities trading mostly unchanged today, while Singapore & Malaysia equities are a touch higher today up 0.20%

OIL: Crude Steady In APAC Session, Headed For A Second Monthly Rise

Oil prices are headed for their second straight monthly rise as they are little changed during APAC trading after falling around 0.8% yesterday. Expectations of an extension to OPEC cuts are outweighing continued US stock builds. WTI is unchanged at $78.53/bbl, close to the intraday high, and Brent is 0.1% lower at $82.11, closes to today’s $82.13 peak. The USD index is down 0.1%.

• Oil weakened on news that EIA crude stocks rose a more-than-expected 4.2mn barrels last week after 3.5mn the previous week. Gasoline fell 2.83mn and distillate -0.5mn but refinery utilisation rose almost 1pp to 81.5% resulting in increased product output.
• WTI timespreads widened further indicating a tightening of the market, according to Bloomberg. Trafigura’s chief economist Rahim noted that “you’re hearing the phrase ‘upside risk’ a lot more” from the manufacturing and petrochemicals sectors.
• Later the Fed’s Bostic, Goolsbee and Mester speak. January US income/spending data including the PCE deflators, jobless claims, February MNI Chicago PMI and Kansas Fed index print. There are also German, French and Spanish preliminary February CPIs and Q4 Canadian GDP.

GOLD: Slightly Firmer Ahead Of US Inflation Data

Gold is slightly stronger in the Asia-Pac session, after closing 0.2% higher on Wednesday.

• Bullion recovered off a low of $2024.59 to finish at $2034.55 as the USD gave up earlier gains and US Treasuries rallied.
• US Treasuries finished the NY session with modest gains. US Treasury curve bull-steepened ahead of key PCE Deflator data later today, with yields 2-5bps lower. US Treasuries were supported by a flurry of balanced Fed speak.
• While Atlanta Fed President Bostic remains "comfortable" with a patient Fed strategy to address inflation, he still expects the first rate cut this summer.
• More cautiously, NY Fed President Williams reiterated the Fed has a "ways to go to sustained 2% inflation", while Boston Fed President Collins wants greater confidence in disinflation before softening policy.
• According to MNI’s technicals team, recent price activity has defined key resistance at $2065.5, the Feb 1 high, and key support at $1984.3, the Feb 14 low - both levels represent important short-term directional triggers.