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:
- E.C.B. DECISION DUE AT 0745ET; MKT FOCUS IS ON RESPONSE TO RECENT YIELD RISES
- B.O.J. MULLS CLARIFYING 10-YR JGB BAND VIA STATEMENT (MNI); MAY TWEAK TIERED DEPOSIT SYSTEM (RTRS)
- E.U. TO EXTEND VACCINE EXPORT BLOCK TO END-JUNE (RTRS)
- CHINA-US TALKS MAY PAVE WAY FOR XI-BIDEN MEETING (MNI EXCLUSIVE)
FIG. 1: Cautious Pre-ECB Optimism
BBG, MNI
NEWS:
B.O.J. (MNI BRIEF): The Bank of Japan board may clarify its position on the tolerated trading range for 10-year JGBs via a formal policy statement to boost transparency, MNI understands. The current range, which is seen tolerating a band of 20 bps either side of the 0% target for 10-year JGBs, is based on remarks by BOJ Governor Haruhiko Kuroda and not official guidance in policy statements. The BOJ will likely also show that the range will be flexible, tolerating the 10-year yield moving slightly outside the range, although it will be seen as undesirable for the rate to move sharply as such a move weakens the impact of easy policy.
B.O.J. (RTRS): The Bank of Japan may tweak a three-tier deposit system at next week's policy review to exempt a larger portion of reserves from negative interest rates, said sources familiar with its thinking. The move would aim to mitigate the pain negative rates inflict on financial institutions' profits, and convince markets that the demerits of the policy won't keep it from pushing interest rates deeper into minus territory, they said. "Adjusting the tiered system is one effective way to deal with the side-effects of negative rates," one of the sources said, a view echoed by two more sources.
US-CHINA (MNI EXCLUSIVE): A high-level U.S.-China meeting in Alaska could pave the way for a meeting between President Xi Jinping and President Joe Biden as soon as this year if the U.S. side indicates a willingness to roll back Trump-era measures including tariffs, policy advisors in Beijing told MNI. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
E.U./COVID: Reuters reporting that according to an EU source the bloc is set to extend its vaccine export control until end-June in a move that could strain relations further with nations reliant on EU-produced COVID-19 vaccines.
- The measure is currently due to expire at the end of March, but Reuters reports member state gov'ts have given approval to the Commission to extend the measure for another three months.
- Earlier in March, Italy blocked the export of hundreds of thousands of doses of COVID-19 vaccines to Australia with the approval of the European Commission.
- The move highlights the increasing creep of vaccine nationalism within the EU. Senior officials in the bloc have criticised other countries (the US, and notably the UK) for allegedly blocking the export of vaccines to the EU, but then have launched some of the world's first official measures to block the export of vaccines to other countries outside the EU.
E.U./COVID: In a development that could have significant implications for the rollout of COVID-19 vaccines, Austria, Denmark, Estonia, Latvia, Lithuania, and Luxembourg have all suspended the use of the AstraZeneca/Oxford University COVID-19 vaccine due to dangerous cases of blood clotting potentially related to the vaccine.
- Unclear how widespread this complication may be, but it is likely to be closely observed given the huge numbers of AZ vaccines being administered/already administered worldwide.
- It should be noted that no other countries have so-far seen these complications, even those that have administered far larger numbers of the vaccine than these EU states such as the UK and India.
U.S.: U.S. businesses see expectations for inflation in one year at the highest level in a decade, according to a survey released Tuesday by the Atlanta Federal Reserve. Firms' inflation expectations for the coming year increased to 2.4 percent, the highest since the series started October 2011. Firms' long-term inflation expectations - over the next five to 10 years - have ticked back up to pre-covid levels reaching 2.8 percent, the report said.
CHINA: China's aim of GDP growth over 6% set for 2021 aims to guide expectations of promoting high-quality development and takes account of continued global uncertainties, Premier Li Keqiang said Thursday. At a press conference to mark the end of the National People's Congress, Li said it is not a low target considering the country's current CNY100 trillion economy, and will help bridge into goals for the following years to avoid disturbing market expectations. The Chinese economy is predicted to grow about 8% this year given the low base effect comparisons to a pandemic-sapped 2020.
CHINA-HONG KONG (BBG): Chinese lawmakers approved an extensive overhaul of how Hong Kong chooses its leaders, a momentous step in Beijing's efforts to curb opposition in the Asian financial hub's political system. The National People's Congress overwhelmingly passed a proposal Thursday expected to change the size and composition of the body that picks the city's chief executive, and have it nominate local legislators. The rubber-stamp parliament was also slated to call for establishing a mechanism to ensure candidates for elected office are "patriots," remaking the only open elections under Beijing's rule.
CHINA (MNI EXCLUSIVE): China's population could begin to fall by as early as 2025, adding urgency to plans to smoothen national income distribution to ease the demographic drag on consumption and growth though targets to double GDP and income by capita by 2035 should still be met, a high-ranking policy advisor told MNI. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
DATA:
No key data in the European morning session.
FOREX: Greenback Offered Ahead of ECB
- The greenback trades poorly early Thursday, with the USD index ebbing lower for a third consecutive session. This reinforces the importance of the 200-dma in the USD index, which could remain a key level on any resumption of strength. First support undercuts at 91.426/91.211.
- Data and newsflow have been few and far between, but the upcoming Bank of Japan meeting (next week) is still a focus, with source reports this morning further suggesting the board could tweak their yield curve control approach as part of their policy review. JPY is also weaker, with EUR/JPY nearing the late February cycle highs of 129.98.
- AUD, NZD are the strongest performers so far, buoyed by persistent strength in equities, with the e-mini S&P narrowing the gap with alltime highs to just 30 points.
- Focus rests on the ECB rate decision, with markets awaiting the ECB's take on the recent volatility in global bond yields. Markets continue to test the ECB's reaction function, particularly following the recent slowing PEPP purchases as part of their asset purchase program. Weekly US jobless claims data is also due.
FIXED INCOME: What will the ECB say about yields?
Core fixed income started on the front foot this morning, but the rally has since stalled a little, although Treasuries, Bunds and gilts all remain at their highest levels for a week.
- Perhaps the more interesting move has been seen in European peripherals, however, with BTP futures moving to their highs of the month ahead of today's ECB policy decision.
- Focus will very much be on how the ECB responds to the increase in yields since the last meeting. Indeed, in some respect the increase in yields is a bigger question for the market right now than the immediate impacts of Covid-19 on the economy. The ECB will unveil its new staff projections but the Q&A is likely to revolve around how the ECB will adapt the pace of its PEPP programme in different market conditions.
- TY1 futures are up 0-10+ today at 132-27+ with 10y UST yields down -2.7bp at 1.493% and 2y yields down -0.9bp at 0.146%.
- Bund futures are up 0.16 today at 171.48 with 10y Bund yields down -0.7bp at -0.322% and Schatz yields up 0.5bp at -0.683%.
- Gilt futures are up 0.11 today at 128.92 with 10y yields down -0.6bp at 0.707% and 2y yields up 0.1bp at 0.063%.
EQUITIES: European Stocks Mostly Higher Pre-ECB
- Asian stocks closed higher, with Japan's NIKKEI up 175.08 pts or +0.6% at29211.64 and the TOPIX up 5.18 pts or +0.27% at 1924.92. China's SHANGHAIclosed up 79.094 pts or +2.36% at 3436.831 and the HANG SENG ended 478.09 ptshigher or +1.65% at 29385.61
- European equities are mostly up, with the German Dax down 22.04 pts or -0.15%at 14349.69, FTSE 100 up 4.38 pts or +0.07% at 6712.62, CAC 40 up 12.61 pts or +0.21% at 5895.36 and Euro Stoxx 50 up 8.22 pts or +0.22% at 3763.32.
- U.S. futures are higher, led by the NASDAQ, with the Dow Jones mini up 97 pts or +0.3% at 32376, S&P 500 mini up 27.25 pts or +0.7% at 3923.75, NASDAQ mini up 223.25 pts or +1.75% at 12972.
FOREX: Broad Gains As Dollar Softens
- WTI Crude up $1.06 or +1.64% at $65.3
- Natural Gas up $0.01 or +0.3% at $2.696
- Gold spot up $7.58 or +0.44% at $1699.22
- Copper up $8.15 or +2.02% at $411.65
- Silver up $0.1 or +0.38% at $26.4215
- Platinum up $13.31 or +1.1% at $1224.04
LOOK AHEAD:
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.