Morning Report APAC: Treasury yields recover after touching lows
- USDJPY fell after the support level of 105.50 was broken, reaching a low of 103.55
- The AUD and NZD dropped following the move in commodities
- Treasury yields managed to recover after touching the lowest level since 2012
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8)
- 2030: USD – Housing Starts MoM (Exp. -1.9%, Prev. 6.6%)
- 2030: CAD – CPI Core MoM (Exp. 0.3%, Prev. 0.2%), YoY (Exp. 2.1%, Prev. 2.2%)
- 2300: EUR – European Central Bank President Mario Draghi speaks in Munich
- CPI rose 0.2% MoM (Exp. 0.3%) and 1.0% YoY (Exp. 1.1%). The Core CPI came as expected at 0.2% MoM driven by a 0.4% jump in shelter costs. Energy prices increased 1.2% MoM led by a 2.3% pop in gas prices. Food prices declined 0.2% including a 0.5% slide in food purchased for home consumption. It was the fifth month in seven that grocery prices declined. YoY the headline CPI rose 1.0%. YoY core prices jumped 2.2% to mark the seventh successive month that annualised core inflation matched or exceeded 2%.
- Home Builder sentiment improved and came in at 60 (Exp 59). The sales expectations index leapt five points to 70, the highest level since October.
- The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey came back into positive territory at 4.7 and better than expected but indicators for new orders, shipments, and employment remained negative.
- Initial jobless claims rose 13,000, to 277,000 in the week ending June 11, modestly higher than our (275,000) and median consensus expectations (270,000). The four-week moving average fell to 269,000 (previous: 270,000)
- Bank Indonesia cut all policy rates by 25 basis points against market expectations. The bank lowered the old benchmark policy rate to 6.50%, and the new policy rate (7d reverse repo rate) to 5.25%.
BI also eased rules around loan to value for the housing market, raising it to 80% (from 78% earlier). This easing will come into effect in August. This move is aimed at boosting housing transactions, and to improve credit growth, which stayed low at 8.0% y/y in April.
Foreign exchange movements
Treasury yields managed to recover after touching the lowest level since 2012. With the rates going negative in Europe and already negative in Japan, the demand for US treasuries, even at this level should remain strong.
The bunds yields as stated above continue to move lower and the spread with peripherals continue to widen with Italy, Spain, Portugal and Greece respectively up 4.5, 3.5, 6.5 and 7.9 basis points in the 10-year.
The yield on the 30-year Swiss bond became the longest-dated maturity to fall into negative territory. The 30-year yield declined 2.8bps to minus 0.043%.
US stocks overcame steep morning losses that had the S&P 500 on track to record its longest losing streak since August to close with broad gains and near enough to session highs. There was no obvious catalyst for the turn in fortune however technical support (2,050 in the SPX), generally oversold conditions and a bounce in the British pound after campaigning for the Brexit vote was halted all appeared to play their part.
The credit spreads recovered slightly yesterday following a few days of risk-off in the credit space.
- China Shenhua (1088 HK) cut to hold at Jefferies
- Shanghai Shimao (600823 CH) rated new neutral at Macquarie
- Tsingtao Brewery (168 HK) cut to reduce at Guotai Junan
- Shenhua (1088) May commercial coal production 22.4mln tons, -7.4% YoY. Coal sales 28.7m tons, -22% YoY
- Yanzhou (1171) plans to raise up to RMB6bln in private placement and buy Jiutai Energy stake
- CH Overseas Grand Oceans (81) Jan-May contracted sales HK$8.13bln
- COLI(688) May contract sales HK$17.3bln vs HK$17.2bln last yr; Jan-May contract sales HK$72.1bln, up 14% YoY
- Hopson Dev (754) Jan-May contracted sales RMB5.56bln, up 22.3% YoY. Area 519,000 sq.m, up 43.21% YoY
- BJ Capital Land (2868) is said to seek $240mln three-year loan. (Bloomberg)
- Country Garden (2007) bought back 10mln shares for HK$3.04-HK$3.05 each
- CR Cement (1313) entered a strategic coop agreement with Anhui Conch (914). Anhui Conch will help CR Cement’s production line construction and technique improvement
- SJM (880) hotel room rate down 10% YoY. Grand Lisboa Macau
- Guotai Junan (1788) said its futures unit is under investigation by CSRC.
- BOCHK (2388) announced that their prime rate and current deposit rate unchanged at 5% and 0.101% respectively.
- ICBC (1398) to open branch in Czech. Czech also plans to invest EUR200mln in a fund that is jointly set up with ICBC for investing in central and eastern Europe
- PBOC gives Meituan three months to overhaul its online payment services. (Sina)
- ZTE (763) to dispose of stakes in subsidiary to E-Capital with consideration RMB382.5mln
- Gome (493) bought back 30mln shares at HK$0.90 each on June 16
- CH All Access (633)’s spin-off of its monitor business has been approved by the HKEx
- Fosun (656)’s chariman Gup Guangchang bought 770,000 shares on June 14
- Hitachi Kokusai (6756 JP): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley
- Sumitomo Forestry (1911 JP): Raised to outperform at Daiwa
- UACJ (5741 JP): Rated new buy at Jefferies
- ES-Con Japan (8892 JP), Solxyz (4284): To move listing to TSE1 from TSE2 on June 23
- Yamami (2820 JP): Begins trading on Jasdaq after IPO priced at JPY 1,690
- Crown Resorts (CWN AU) credit rating put on review for downgrade by Moody’s
- Virgin Australia (VAH AU) credit rating affirmed at S&PGR
- Arrium (ARI AU): Posco denies media report it is interested in buying co’s Whyalla steelworks
- Fonterra (FSF NZ) names Jacqueline Chow to lead new global consumer unit
- Trilogy International (TIL NZ) completes NZ$50mln capital raising
- Syrah Resources (SYR AU): halted for $A194mln equity raising at $A6.05/share
- Elders (ELD AU): halted for capital raising, hybrid buyback
- IAG (IAG AU) raised to buy vs hold at Bell Potter
- Sandfire Resources (SFR AU) raised to buy vs neutral at UBS
- GPT Group (GPT AU) cut to underweight vs overweight at Morgan Stanley
- Mirvac (MGR AU) raised to overweight vs underweight at Morgan Stanley
– Edited by Gayle Bryant
This report was compiled by the Saxo APAC Sales trading team in Singapore – the home of social trading. Follow the team on @SaxoStrats or post your comment below to engage with Saxo Bank's social trading platform. Join our Global Market Call daily at 12:40 SG Time
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