HALISTER1: INSIDE ASIA: EMFX Fall as Global Yields Up; Won Slip on N.Korea

INSIDE ASIA: EMFX Fall as Global Yields Up; Won Slip on N.Korea

(Bloomberg) -- Asian EM currencies weaken as global bond yields jump overnight after ECB fails to signal more easing ahead. South Korea’s won leads losses, sliding as much as 1% after North Korea conducts a nuclear test.
  • Some traders and investors think the recent sell-off in USD may have been excessive, triggering a correction today, Shigeki Yoshitoshi, head of Japan FX and Commodities sales at ANZ, says
  • Regional bonds followed a decline in global debt markets after ECB downplayed the need for additional stimulus
    • Australia’s 10-year yield climbs 8 bps to 1.949% while rate on similar maturity debt in Japan increases 1.5 bps to -0.025%; yield on China’s 10-year notes steady at 2.8000%
  • Won slides as much as 1% after South Korea detects artificial earthquake in North Korea and S.Korean officials say the North conducted its fifth and biggest ever nuclear test today
    • South Korea foreign ministry holds emergency meeting: Yonhap
  • Japan Chief Cabinet Secretary Suga says his country will consider further sanctions against North Korea
    • BOK kept interest rate at 1.25% as forecast; domestic demand continued to improve, while economic sentiment lifted somewhat, central bank says in statements after the decision
  • Onshore and offshore yuan decline for a second day as China sets reference rate weaker against dollar; offshore yuan liquidity remains tight though easier from yday
    • PBOC advisor Fan says yuan should weaken like other currencies
    • Sudden spike in USD/CNY triggered broad-based dollar buying versus offshore yuan, according to FX traders in North Asia
    • Selloff in onshore yuan after opening may be related to easing concerns over CNH liquidity, Ken Cheung, Asian FX strategist at Mizuho Bank says
    • Rising short-term CNH rates may be partly related to expiration of previous FX operations, Frances Cheung, head of rates strategy, Asia ex-Japan at Societe Generale in Hong Kong, writes in note
  • China Aug. consumer prices rose 1.3% y/y vs est. +1.7%
    • Bond yields may face downward pressure on knee-jerk reaction to latest CPI reading which is well below estimates, David Qu, Shanghai-based markets economist at ANZ says
    • China says yuan/dollar rate flexibility increases
    • If China’s GDP was calculated based on SAFE trade data instead of customs trade data, GDP lvl would be much smaller, Sue Trinh, head of Asia FX strategy at RBC Capital Markets writes in a note today
  • Yen set for biggest weekly gain since week ended July 29
    • BOJ Governor Kuroda meets with PM Abe; will speak to press after 1pm local time: Nikkei
    • USD/JPY pressured lower as macro funds sold spot from 102.40, according to an Asia-based FX trader
    • Higher expectations for a Fed rate hike and a BOJ easing are required for USD/JPY to be bought substantially, says Yasuhiro Kaizaki, NY-based vice president for global markets at Sumitomo Mitsui Trust Bank; test of 103 depends on Fed officials’ speeches today and next Monday as well as on UST yields
    • Japanese lifers demand driving offshore bond flow, life insurance companies accounted for 75% of August offshore bond flow, buying more than 1t yen for 3 consecutive months: TD
  • Aussie and kiwi little changed, both set for 2nd weekly gains
    • Australia July home-loan approvals declined 4.2% m/m against est. 1.5% slide
    • New Zealand retail card spending unexpectedly declined in Aug., falling 0.4% m/m vs est. 0.3% gain
  • Peso drops for fourth day
    • Philippine exports decreased 13% y/y in July, more than est. -10.0%
  • Ringgit set to snap two-day advance
    • Malaysia’s industrial production probably increased 4.5% y/y in July following 5.3% gain prior month, according to Bloomberg survey before data today
  • Rupiah set to snap five-day rally
    • BI to ease further in Sept. or Oct. if data supports, Governor Martowardojo says
    • BI sees 2017 budget deficit at around 2.5% of GDP
    • Indonesia President Widodo meets Philippine President Rodrigo Duterte in Jakarta
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Frances Cheung (Societe Generale SA)
Joko Widodo (Republic of Indonesia)
Ken Cheung (Mizuho Financial Group Inc)
Shigeki Yoshitoshi (Australia & New Zealand Banking Group Ltd)
Yasuhiro Kaizaki (Sumitomo Mitsui Trust Holdings Inc)

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UUID: 7947283

HALISTER1: JGBs Decline as BOJ Doesn’t Buy Longer-Dated Debt: SMBC Nikko

JGBs Decline as BOJ Doesn’t Buy Longer-Dated Debt: SMBC Nikko

(Bloomberg) -- Japan’s govt bonds drop, led by super-long end, as BOJ refrains from buying such maturities today, says Souichi Takeyama, Tokyo-based rates strategist at SMBC Nikko Securities, by phone.
  • BOJ’s announcement of JGB purchases spurring position adjustment ahead of 20-year auction on Sept. 13
  • Overnight weakness of bond markets in Europe and U.S. also weighing on JGBs: Takeyama
  • 10-year yield up 1.5 bps at -0.025%, 20-year yield up 3.5 bps at 0.425% and 30-year yield up 5 bps at 0.500%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Souichi Takeyama (SMBC Nikko Securities Inc)

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UUID: 7947283

HALISTER1: Gundlach Warns Fed Would Hike Even With Market Pricing Only 40%

Gundlach Warns Fed Would Hike Even With Market Pricing Only 40%

(Bloomberg) -- The Fed is likely to raise rates even when the market-implied probability is as low as 40% in Bloomberg’s WIRP function, says DoubleLine CIO Jeffrey Gundlach.
  • A hike this month is unlikely if the number is under 40%, Gundlach said in a webcast Thursday post-mkt NY time
  • WIRP, which calculates probability in fed fund futures, stood at 28% yday; that’s down from 42% on Aug. 26 following dismal data on U.S. jobs, manufacturing and services
  • Gundlach says the Fed is determined to show independence from data
    • NOTE: WIRP was 78% on eve of Fed’s rate hike on Dec. 16, 2015
  • In the past week, Fed presidents including Lacker, Mester and Williams have offered upbeat assessments of the economy
    • Even so, WIRP pricing for chance of Sept. hike fell to 28% from 34% end of last week
  • Fed Governor Brainard, a permanent voter, was added overnight to a list of speakers on Monday; see calendar
  • Barclays says if Chair Yellen wants to raise market pricing for a hike, this is one of the last chances before the FOMC’s blackout period, according to a note
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Jeffrey Gundlach (Doubleline Capital LP)
Lael Brainard (Federal Reserve System)

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UUID: 7947283

HALISTER1: China’s CPI Slowdown May Pressure Bonds Yield in Near Term: ANZ

China’s CPI Slowdown May Pressure Bonds Yield in Near Term: ANZ

(Bloomberg) -- China bonds yield may face downward pressure on knee-jerk reaction to latest CPI reading which is well below estimates, David Qu, Shanghai-based markets economist at ANZ says.
  • China Aug. CPI rises 1.3% y/y, est. 1.7% gain; July 1.8%
    • PPI in the same period contracted 0.8% y/y vs. est. -0.9%; July at -1.7%
  • Still, PPI may be better gauge as it reflects profitability in industrial sectors
    • Shallower drop in PPI also partly due to rising commodity prices
  • Below-ests. CPI could be due to food prices, and base effect
  • NOTE: China food CPI grew 1.3% last month, slowest since Jan. 2015
    • CPI in same month last year grew 2% y/y, pace is fastest in 2015
  • Yield on 2.90% govt bond due May 2026 little changed at 2.805%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
David Qu (Australia & New Zealand Bank China Co Ltd)

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UUID: 7947283

HALISTER1: Cracks Are Appearing in Bond Market That Led Record Global Rally

Cracks Are Appearing in Bond Market That Led Record Global Rally

Alert: HALISTER1
Source: BN (Bloomberg News)

Tickers
8301 JP (Bank of Japan)
3492806Z US (Doubleline Capital LP)

People
Chotaro Morita (SMBC Nikko Securities Inc)
Francesco Garzarelli (Goldman Sachs Group Inc/The)
Haruhiko Kuroda (Bank of Japan)
Hideo Shimomura (Mitsubishi UFJ Financial Group Inc)
Jeffrey Gundlach (Doubleline Capital LP)

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UUID: 7947283