MNI US OPEN - BoJ Ends NIRP and YCC, Maintains JGB Buying

NEWS

BOJ (MNI): BOJ Ends Negative Rate, YCC, Maintains JGB Buying

The Bank of Japan board on Tuesday decided to end its negative interest rate and raised the unsecured overnight call loan rate to a range of between zero percent to 0.1% -- the first rate hike since February 2007.The BOJ also scrapped the yield curve control policy and deleted the 1.0% ceiling of the long-term interest rate. However, the bank will maintain its Japanese Government Bond buying programme at about the same volume and will make "nimble responses," increasing its purchases, should long-term interest rates rise.

BOJ (MNI): Economy to Drive Future Rate Hike Path - BOJ's Ueda

Bank of Japan Governor Kazuo Ueda refrained from elaborating on the pace of future interest rate rises, stressing further hikes will depend on economic developments and prices. “We will decide on the policy interest rate like other central banks that are focused on how the economy and prices evolve,” Ueda told reporters. Inflation expectations remain far from 2% and the BOJ must continue with its easy policy, he said, ruling out an imminent rate hike. But he added stronger-than-expected inflation and growing upside risks to prices would drive policy action.

RBA (MNI): RBA Holds, Drops Future Cash Rate Hike Language

The Reserve Bank of Australia board left the cash rate unchanged today at 4.35%, maintaining February's ambiguous stance, but dropping language that a future rate cut could not be ruled out. In a statement released after the decision, the board noted it would not rule “anything in or out,” a change from the previous note which stressed a further increase “in interest rates cannot be ruled out.” The board’s decision was largely anticipated. The cash rate has now held steady since November, when the board hiked it 25 basis points. Speaking at a press conference following the decision to hold the cash rate at 4.35%, Bullock stressed the board would not “rule anything out.”

US (BBG): US Lawmakers Reach Deal to Keep Government Open Through Sept. 30

Congressional leaders and the White House reached a handshake deal to fund the US government through Sept. 30, according to people familiar with the negotiations, after six months of bitter ideological clashes delayed finishing an annual spending plan. Lawmakers will now race to pass the agreement before a midnight Friday deadline for a partial government shutdown. The first task will be putting the accord in writing, which could take several days.

US/MIDDLE EAST (BBG): Blinken Returns to Mideast With US-Israel Tensions High

US Secretary of State Antony Blinken will make his sixth visit to the Middle East since the Israel-Hamas war broke out in October, as tensions persist between Washington and the Israelis over the conduct of the fighting and the dire humanitarian situation in Gaza. Blinken, who has been traveling in Europe and Asia since Thursday, will extend his trip and make stops in Saudi Arabia and Egypt to meet with leaders and other senior officials in both countries, the State Department said on Tuesday.

US/ISRAEL (BBG): Biden and Netanyahu Ease Their Feud But Suspicions Linger

Joe Biden and Benjamin Netanyahu sought to turn down the heat in their unusually public feud over Israel’s war in Gaza Monday, but there was little sign the domestic political pressures that have pushed them apart are easing. After weeks of growing vitriol between the two leaders over Israel’s punishing ground invasion of the Gaza Strip, the American president won a valuable concession in a telephone call with the Israeli prime minister on Monday — their first in more than month.

US (BBG): Wall Street Bonuses Decline Slightly Amid an Influx of Bankers

The average Wall Street bonus dropped slightly last year as banks kept compensation reined in amid an ongoing deal slump and the number of employees working in the securities industry ticked up. The average annual cash bonus fell 2% to $176,500 in 2023, the lowest since 2019, according to an analysis by New York State Comptroller Thomas DiNapoli. The drop was far less dramatic than it was in 2022, when the average bonus slumped 25%. Industrywide, the bonus pool was $33.8 billion, unchanged from the previous year and far below the $42.7 billion total in 2021.

ECB (BBG): ECB Will Have ‘Far More Data’ at June Decision, Guindos Says

European Central Bank Vice President Luis de Guindos reiterated that he and his colleagues will have much more information to decide on interest rates when they meet in June. Speaking at an event in Madrid on Tuesday, the former Spanish finance minister didn’t dwell much on the outlook for borrowing costs, while cautioning that things could turn out differently from what investors expect. The ECB will have “far more data” to better evaluate its decisions in June, de Guindos said.

FRANCE (BBG): Macron Renews Push to Make Paris Attractive for Capital Markets

Emmanuel Macron pledged to make Paris a haven for capital markets with a fresh round of measures that would facilitate initial public offerings and direct more investment to smaller companies. “We need to step up the efforts begun in 2017 to make France a more attractive place to help finance our economy,” the French president said in a recorded speech shown Tuesday at a conference held by Euronext NV, the Paris-based stock exchange operator. “This will be the priority in the coming months at national level.”

CHINA (MNI): LPR to Hold, Idle Funds Targeted

MNI (Beijing) China’s reference lending rate will likely remain unchanged in March as the central bank focuses on pushing lenders to implement previous easing measures via lower real loan rates and channelling ample liquidity through the economy. The Loan Prime Rate, based on the People’s Bank of China’s medium-term lending facility (MLF) rate and quotes submitted by 20 banks, will hold at 3.45% for the one-year maturity and 3.95% for the over-five-year tenor on Wednesday.

CHINA/RUSSIA (MNI): Putin to Visit China in May

MNI (London) Reuters claiming that according to its sources, Russian President Vladimir Putin will visit China for talks with President Xi Jinping in May. This would mark Putin's first foreign trip of his latest term in office, and act as a further signal of Putin's intent to develop increasingly close links with China. RTRS: "Another of the sources said Putin's trip to China would probably take place in the second half of May. Two of the sources said the Putin visit would come before Xi's planned trip to Europe."

CHINA (BBG): China IPO Market to See Huge Change with Tighter Scrutiny: Paper

A series of guidelines from China’s securities regulator to tighten oversight of initial public offerings will impact the share-issuance market heavily, according to the China Securities Journal, citing academics. The new rules “firmly say no” to low-tech companies posing as high-tech firms, so capital market support goes to the places where it’s most needed, the journal said, citing Ernst & Young Greater China partner Tang Zhehui.

INDIA/CHINA (MNI): Gov't Hits Back at China Def Min Claims on Himalayan Territory

MNI (London) A spokesman for the Indian Ministry of External Affairs Randhir Jaiswal has hit back at comments from the Chinese Defence Ministry regarding the state of Arunachal Pradesh in the Himalayas. "We have noted the comments made by the Spokesperson of the Chinese Defence Ministry advancing absurd claims over the territory of the Indian State of Arunachal Pradesh. Repeating baseless arguments in this regard does not lend such claims any validity. Arunachal Pradesh was, is and will always be an intergral and inalienable part of India..."

CENTRAL BANK PREVIEWS

MNI FED PREVIEW - MARCH 2024: Countdown to Confidence

The FOMC will hold rates at the presumed peak of 5.25-5.50% at its March 19-20 meeting, while reiterating its cut-leaning forward guidance. Incoming data provides the FOMC with both the justification and the flexibility to be patient before making the first cut. It’s unlikely the signal provided by the Dot Plot / economic projections will be much different to the last edition in December, while the Statement will be little changed after January’s overhaul. It would only take two participants getting slightly more hawkish on 2024 rate prospects to move the median dot from 3 cuts to 2.

MNI NORGES BANK PREVIEW - MARCH 2024: Cuts Still Some Way Off

The Norges Bank are unanimously expected to leave the policy rate on hold at 4.50%. Main interest will lie in the updated policy rate path projection within the March Monetary Policy Report, which will inform the guidance around how long rates will be held at current levels. The MNI Markets Team expects a small downward revision to the rate path, with key variables tracking below the December MPR forecasts. This will likely see the first full 25bp rate cut brought forward a little earlier in Q4 2024 than the current rate path indicates.

MNI SNB PREVIEW - MARCH 2024: Dovish Tilt on the Cards

Market pricing and consensus views for the SNB’s March decision are on a knife-edge between a 25bps cut or a hold at 1.75%. The decision will depend on the SNB’s longer-term assessment of inflation against deflation risks, as headline CPI has printed close to the middle of the SNB’s target range in recent months. A hold would likely be accompanied with a clearly dovish tilt in communication. Markets currently price 8-9bps of easing for the meeting, corresponding to about a 2/3 implied probability of a hold, while a 25bps cut to the deposit rate would likely be accompanied with cautious language on policy ahead.

MNI BCB PREVIEW - MARCH 2024: Focus on Potential Guidance Adjustment

All surveyed analysts believe that the Copom will continue the easing cycle with another 50bp cut, bringing the Selic rate down to 10.75%. Prior guidance in the January statement reiterated that economic conditions remain consistent with this strategy. However, several BCB officials have recently indicated the possibility of changing the forward guidance, and market participants will therefore be alert for any tweaks to the statement that provide clues on whether the easing pace could be adjusted in the coming meetings.

MNI CNB PREVIEW - MARCH 2024: Keeping Pace

Last-minute comments from Bank Board members, inspired reflection on market wagers, with remarks from Eva Zamrazilová and Jan Kubíček reducing the perceived odds that the push for a faster pace of rate cuts could muster sufficient support. Consensus looks for another 50bp reduction in the two-week repo rate, possibly coupled with cautious rhetoric from Governor Aleš Michl. We think that the sentiments of individual policymakers verbalised in their recent communications, persistent koruna weakness, and concerns about lingering risks to the inflation outlook limit the probability of faster monetary easing.

MNI BANK INDONESIA PREVIEW - MARCH 2024: IDR Needs Fed to Ease First

Bank Indonesia (BI) is unanimously expected to leave rates at 6.0% at its March 20 meeting given the persistence of a high level of “global uncertainty” and little new domestic information since the last decision. FX stability remains its focus and as USDIDR remains elevated, a pivot to a dovish tone is highly unlikely this month. BI will not want to risk further rupiah softening by cutting rates ahead of the Fed.

FOREX: JPY Offered as BoJ Withdraw from NIRP

• An exit from the Bank of Japan's negative interest rate policy has resulted in a weaker Japanese currency, with USD/JPY through Y150 to the upside and narrowing the gap with cycle highs and the bull trigger at 150.89. With the rate hike well telegraphed, markets focused on the Bank's commitment to containing any spillover in Japanese bond markets and dovish guidance suggesting today's rate hike may not be the first in a sequence of fast paced policy tightening.
• The USD is comfortably the strongest performing currency in G10, with the USD Index back above the 200-dma and nearing March's best levels at 104.292.
• The RBA decision overnight came in unchanged, as expected, and has worked against Antipodean currencies as the RBA dropped their tightening bias in the policy statement. AUD/USD has backtracked below the 200-dma and is narrowing in on the 0.6500 handle, weakness through which would put prices at the lowest level since March 6th.
• Germany's ZEW survey, US housing starts and building permits data and Canadian inflation top the agenda for Tuesday, with central bank speakers still quiet as the Fed start their two-day meeting ahead of Wednesday's policy announcement.

US TSYS: TY Sticks to Asia Range, Little Movement Post-BoJ

TYM4 +0-04 at 109-30, sticking to the 0-06 range established in Asia-Pac hours, volume running at a healthy ~247K.

• Contract above yesterday’s low (109-24+), which provides initial support.
• Initial firm resistance at the 50-day EMA.
• Cash Tsy yields little changed to 1bp lower.
• Fed pricing steadies after the recent removal of rate cut premium.
• FOMC-dated OIS fully discounts a 25bp cut through the July meeting, with ~70bp of cuts priced through year end.
• A reminder that US lawmakers have reached a funding deal to avert a partial government shutdown, with the agreement funding the government through Sep 30.
• Building permits & housing starts data will cross in NY hours, with 20-Year Tsy supply also due.

EGBS: Tight Ranges as BoJ Hike Has Little Lasting Impact

Core/semi-core EGBs have traded in a tight range this morning, with spillovers from the BoJ's NIRP exit overnight having a limited lasting impact.

• The BoJ's rate hike had been anticipated by the time of the meeting and Bunds have held above Monday's low as a result, currently +13 ticks at 131.79, towards the middle of today's 32 tick range.
• Comments from ECB's Guindos and de Cos this morning aligned with the status quo, again noting the June meeting as the most likely for the first ECB rate cut.
• There haven't been any notable data releases thus far today, but syndications from the EU (Feb-50 Green EU bond) and Italy (May-36 BTPei) are ongoing.
• The German and French cash curves have lightly bull steepened while 10-year periphery spreads to Bunds are wider, with GGBs underperforming.
• The German ZEW survey highlights today's data calendar, though participants will also still have one eye on risk events scheduled later this week (the Fed tomorrow and the BoE/March flash PMIs on Thursday).

EQUITIES: E-Mini S&P Remains Close to Recent Highs, Price Signals Bullish

The trend condition in Eurostoxx 50 futures remains intact and last week’s fresh cycle highs reinforce current conditions. Moving average studies are in a bull-mode position and this continues to reflect positive market sentiment. Sights are on the psychological 5000.00 handle. Clearance of this level would strengthen the bullish condition. On the downside, initial firm support lies at 4867.30, the 20-day EMA. The trend condition in S&P E-Minis remains bullish and the contract remains closer to its recent highs. Fresh cycle highs reinforce current conditions and note that price action continues to highlight the fact that corrections remain shallow. This is an important bullish signal, reflecting positive market sentiment. Support to watch is 5168.27 the 20-day EMA. A clear break of this average would open 5057.80, the 50-day EMA. Sights are on 5300.00 next.

• Japan's NIKKEI closed higher by 263.16 pts or +0.66% at 40003.6 and the TOPIX ended 28.98 pts higher or +1.06% at 2750.97.
• Elsewhere, in China the SHANGHAI closed lower by 22.17 pts or -0.72% at 3062.756 and the HANG SENG ended 207.64 pts lower or -1.24% at 16529.48.
• Across Europe, Germany's DAX trades higher by 17.48 pts or +0.1% at 17951.95, FTSE 100 higher by 6.92 pts or +0.09% at 7729.18, CAC 40 down 3.82 pts or -0.05% at 8145.12 and Euro Stoxx 50 down 2.06 pts or -0.04% at 4980.87.
• Dow Jones mini up 6 pts or +0.02% at 39228, S&P 500 mini down 4.75 pts or -0.09% at 5209.5, NASDAQ mini down 37.5 pts or -0.21% at 18191.

COMMODITIES: WTI Futures Trading Near Monday's Cycle Highs

WTI futures have started this week on a bullish note, trading higher once again, yesterday. Last week’s gains resulted in a break of $79.87, Mar 1 high. The move higher confirms a resumption of the uptrend that has been in place since mid-December last year. Sights are on $83.87 next, the Oct 20 ‘23 high. A break of this level would open $84.87, the Sep 15 ‘23 high and a key resistance On the downside, support to watch is $78.44, the 20-day EMA. The trend condition in Gold is bullish and the latest pullback is considered corrective and appears to be a bull flag - a continuation pattern. The yellow metal recently cleared $2135.4, the Dec 4 high, to deliver a fresh all-time cycle high. The break reinforces bullish conditions and opens $2206.6, a Fibonacci projection. S/T conditions are overbought, a deeper retracement would allow this set-up to unwind. Firm support is $2117.4, the 20-day EMA.

• WTI Crude down $0.19 or -0.23% at $82.53
• Natural Gas up $0.03 or +1.53% at $1.728
• Gold spot down $10.58 or -0.49% at $2149.93
• Copper down $1.7 or -0.41% at $411.3
• Silver down $0.19 or -0.77% at $24.8475
• Platinum down $14.27 or -1.55% at $903.58