Article / 10 August 2016 at 1:55 GMT

Morning Report APAC: Bond yields resume move lower as equities rise

APAC Sales Trading Desk / Saxo Capital Markets


  • USD resumes move lower and bond yields hit all-time lows in several countries
  • Bank of England's QE program has a glitch and pushes GBP below 1.3000
  • US stocks edge slightly higher to further consolidate Friday’s non-farm payrolls rally
  • Oil fell after US output forecasts were boosted
  • European stocks rise for a fifth day to finish at post-Brexit highs

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)



1105: AUD – RBA governor Glenn Stevens speech in Sydney.

Overnight news

US:  Non-farm productivity dropped by 0.5% (Exp. up 0.4%) during the second quarter, which is the third consecutive quarterly decline.

Wholesale inventories unexpectedly rose 0.3% month on month in June (Exp. 0.0%) from an upwardly revised rise in May of 0.2%. The component of wholesale inventories that is used in the calculation of GDP -- wholesale stocks excluding autos -- grew 0.3%. 

The Bank of England’s quantitative easing purchasing program had an issue yesterday, with the central bank failing to find enough sellers to reach its £1.17bn target. See more below.

Foreign exchange


The USD resumed its move lower with bond yields hitting all-time lows in several countries and a rally in European equities .

The BoE’s QE program had a glitch (see above) pushing GBP below 1.3000 for the first time in a month but failed to close below. A confirmed break below should trigger more selling interests .

USDJPY is resuming its move lower after the rally following non-farm payrolls data. The main target is 100.

In emerging markets, the currency to watch is BRL, with USDBRL confirming a break of the 3.2000 level. The market is more and more in search of yields and despite the poor economic data, the investor economy is still rushing to buy local bonds and equities

Exchange rate movement


Volatilities are generally offered in the G10 space and emerging-market currencies. For EM, it’s more related to the risk-on mood and the search for yield.

There is still interest to buy the two month USDJPY upside despite the fact that USDJPY is targeting 100 once again after the rally following NFP.

The new interesting flow from hedge funds is their interest to buy ATMs three months against G10 to cover the US elections. 





The worst may be yet to come for some strained oil companies as $110bn in debt creeps closer to maturity. More than $21bn is estimated to be maturing in 2018, almost three times the total burden in 2017, and a further $29bn through 2021, Moody’s said. Almost two-thirds of debt coming due is speculative-grade. 

BP plans to sell seven-year sterling bonds as the Bank of England prepares to enter the market to boost the economy. The central bank's purchase plan has helped send borrowing costs to a record low. 

China’s banks are increasing their clout in financing international deals. The country's lenders were lead arrangers on $19.9 bn of global syndicated loans for M&A this year, raising their share of that market to 4.4% from 0.9% in 2015.

Chinese bonds also came in under pressure with yields slipping to levels seen during January’s market turmoil. China's 10-year bonds go lower to 2.71%. Demand for the relative safety of government bonds has been driven also by a rising number of company defaults, with a Chinese shipbuilder named Wuhan Guoyu set to default in the onshore market this year. 
Bond yields generally go lower globally with the US 10-year down 5.5 basis points to 1.537%. 10-year yields have fallen the most this month, as an auction of three-year notes drew the strongest demand this year ahead of additional debt sales this week. The bid-to-cover ratio was 2.98, the highest for an auction of the securities since December. 

Focus will be on the UK gilt as the Bank of England's expanded quantitative-easing program ran into some problems yesterday as the central bank failed to buy enough long-dated gilts on Tuesday to reach its stated goal. Yield on 10-year and 30-year bonds fell to record lows after the operation. UK 10-year treasury yield also fell to a record low to 0.580%. Spread of US 10-year against the UK 10-year also widened at 0.916%. BoE will announce its response to the shortfall at 0900 London time. 

RBNZ will announce its policy statement tomorrow at 5am Singapore time. The probability of a 50 bps cut has now rise to 21% for tomorrow's meeting, with a 25bps cut almost a certainty.







US stocks edged slightly higher to further consolidate Friday’s non-farm payrolls rally and brushed aside their longest streak of quarterly declines in productivity since 1979. The Dow Jones Industrial Average inched up 3.76 points to 18,533.05. The S&P 500 crept higher by 0.85 to 2,181.74. The Nasdaq tickled up 12.34 points to 5,225.48.

Crane-maker Manitowoc Co. slumped 16.8% after reported sales fell 4%, reflecting a challenging market environment on a number of levels, particularly in mobile cranes in the Americas amid weak energy markets.  

Gap Inc. dropped 6.3% after reporting comparable sales fell a steeper-than-expected 4% during July than the market estimate of a fall of 0.3%, largely due to a 14% slump at its Banana Republic stores.  

M&A: Dutch recruitment firm Randstad Holding NV agreed to buy online job-posting pioneer Monster Worldwide Inc. at $3.40 a share for Monster, a 23% premium to its closing stock price on Monday. 

European stocks rose for a fifth day to finish at post-Brexit highs and the German DAX posted new 2016 high on the back of well received corporate earnings. The FTSEurofirst 300 index gained 0.95%, to 1,357.93. In London the FTSE 100 advanced 0.6% to 6,851.30. 

Telecoms group Altice soared 14.9% after it reported second-quarter core operating profit rose a better-than-expected 2.7%. Strength in its Portuguese and US businesses offset a decline in profitability at its subsidiary SFR. 

Financial services provider Standard Life jumped 6.8% after it delivered an 18% increase in underlying first-half operating profit. 

Asia Pacific stocks

Hong Kong:

Analyst ratings 

  • Goodbaby Intl rated new ’buy’ at Haitong 
  • HSBC Holdings PLC cut to ’sell’ at Independent Research GmbH 
  • Fortune REIT cut to ’outperform’ at Daiwa Securities 
  • Link REIT cut to ’outperform’ at Daiwa Securities 
  • Prada cut to ’fully valued’ at DBS Vickers 


  • Alibaba’s (BABA US) Ant partners with Ingenico on mobile pay, WSJ says 
  • Changjiang Sec. (000783 CH): 1H net income 1.11b yuan vs 2.45b yuan yr earlier; plans to list unit in H.K. after restructuring 
  • China Jialing Industrial (600877 CH): Co. scraps asset restructuring plan 
  • China Longyuan Power (916 HK): 1H net income 2.28b yuan vs est. 2.26b yuan 
  • China Shenhua Energy (1088 HK): 1H net income falls 18.6% on yr 
  • China Vanke (2202 HK): Responds to questions from bourse 
  • Evergrande (3333 HK): Co. raises 2016 sales target by 50% to 300b yuan 
  • Fosun (656 HK) to set up tourism culture group via restructuring: 21st Century Business Herald 
  • Langfang Development (600149 CH) questioned on Evergrande’s plans 
  • MTR (66 HK): 1H underlying profit falls 26% to HK$5.07b 
  • Pax Global (327 HK): 1H net income HK$310.6m vs HK$309m yr earlier 
  • PICC P&C (2328 HK): Lin Zhiyong appointed as vice chairman and president 
  • Tianjin Tianhai (600751 CH): Says NDRC OKs registration of Ingram Micro deal 
  • Trinity (891 HK): 1H net loss HK$200.4m vs loss HK$47.4m yr earlier 
  • Uni-President China (220 HK): 1H net rises 13% y/y to 775.2m yuan 
  • Wanxiang (000559 CH) to apply for new energy vehicle production license 
  • Wuxi Rural Commercial Bank plans to sell 184.8m shares in IPO 



Analyst ratings 

  • Bandai Namco (7832 JP): Raised to overweight at Mitsubishi UFJ Morgan Stanley 
  • Dai-Ichi Life (8750 JP): Cut to underperform at Keefe Bruyette 
  • St Marc Holdings (3395 JP): Cut to neutral at Ichiyoshi Research 
  • Towa Pharmaceutical (4553 JP): Cut to neutral at Macquarie 



Analyst ratings

  • Fortescue (FMG@AU) cut to sell vs hold at Shaw & Partners 
  • Newcrest (NCM@AU) cut to sell vs hold at Shaw & Partners 
  • South32 (S32@AU) cut to sell vs hold at Shaw & Partners 
  • Whitehaven Coal (WHC@AU) cut to sell vs buy at Shaw & Partners 
  • REA Group (REA@AU) cut to neutral vs outperform at Credit Suisse 
  • Infigen (IFN@AU) rated new hold at Canaccord Genuity 
  • Nufarm (NUF@AU) cut to hold vs buy at Wilsons 
  • Cochlear (COH@AU) raised to buy at BoAML 
  • New Hope (NHC@AU) raised to neutral from underperform at Credit Suisse 
  • ANZ Bank (ANZ@AU) raised to buy from hold at Bell Potter 


  • SkyCity Entertainment (SKC@NZ) net profit rises 13% y/y to NZ$145.7m 
  • TeamTalk (TTK@NZ) hires Cameron Partners to assist with strategic review 
  • AGL Energy (AGL@AU) reports full-year earnings 
  • Fairfax (FXJ@AU) full-year earnings 
  • Oz Minerals (OZL@AU) half-year earnings 
  • Computershare (CPU@AU) full-year earnings 
  • PSivida (PVA@AU) says new Medidur inserter met primary endpoint in study 

Source: CIMB / Bloomberg



The BoE’s quantitative easing purchasing program had an issue yesterday, the bank failing to find enough sellers to reach its £1.17bn target. Photo: iStock


– Edited by Susan McDonald

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