Global govt bond yields rise after surprise BoC hike, big CN banks confirm deposit rate cuts

Asia Market Update: Global govt bond yields rise after surprise BoC hike; Big CN banks confirm deposit rate cuts; Nikkei extends drop ahead of the setting of special quotation prices related to index options and futures.

General trend

- Following Tuesday’s RBA 25bps hike and Gov Lowe’s speech yesterday, Bank of Canada also hiked last night by 25bps.

- Expectations of further CB hikes led global yields to rally. AU 10-yr bonds +17bps to 3.99%; 3-yr yield jumped 16bps to 3.86%, the highest since March 2012.

- Japan Q1 GDP received a kick, 0.2% higher than expected. CAPEX upward revision played a big part (+1.4% q/q, v +1.3%e, prelim +0.9%).

- Several China Officials spoke at the Lujiazi Forum, essentially reiterating that everything is business is normal. No indication was given about any property market support, as the market has been recently expecting.

- CN Yuan fix keeps being set lower, now 7.1280; CN not concerned about recent yuan weakness?

- Nikkei down over 1% for the second day in succession, ahead of tomorrow’s setting of special quotation prices related to index options and futures.

- US equity FUTs were down 0.3% to 0.4%.

Looking forward this week:

- Tonight initial US jobless claims.

- Fri China CPI, PPI and aggregate funding.

- Fri TSMC May Rev figures.

- No US-Fed speak this week, having entered the black-out period ahead of June 14 rate decision.

- [Note for Nikkei 225 Traders] Jun 9th (Fri) is the setting of special quotation prices related to index options and futures.[TTN Analysis: Some traders may wait until March 9 special quotation for Nikkei futures and options before considering whether to push market higher.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 7,132.

- UBS on RBA: Expect to hike interest rate by 25bps at Aug meeting.

- Australia Apr Trade Balance (A$): 11.2B v 13.7Be.

- Australia May Foreign Reserves (A$): 88.9B v 92.4B prior [overnight update].

- New Zealand 10-month (end-Apr) budget deficit NZ$7.02B (NZ$1.27B wider than expected).

- New Zealand Q1 Manufacturing Activity Q/Q: -2.8% v -0.4% prior.

- New Zealand sells total NZ$400M v NZ$400M indicated in 2030, 2033 and 2037 nominal bonds.

China/Hong Kong

- Hang Seng opens -0.1% to 19,227.

- Hong Kong May Foreign Reserves: $421.0B v $427.4B prior.

- Shanghai Composite opens -0.1% at 3,194.

- CHINA MAY FOREIGN EXCHANGE RESERVES: $3.177T V $3.188TE [overnight update].

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repo; Net injection CNY0B v drains CNY11B prior.

- China PBOC sets Yuan reference rate: 7.1280 v 7.1196 prior [weakest CNY fix since Nov 30 2022].

- Chinese press sees likely Loan Prime Rate (LPR) cut following bank deposit rate drop [China PBOC normally sets the LPRs around the 20th of the month (Tues)] - financial press.

- Four large banks (China Construction Bank, Agricultural Bank, Bank of China, Industrial and Commercial Bank) cut Yuan deposit rates today.

- Reportedly some analysts see PBOC could cut key rate as soon as next week or use targeted measures instead to support domestic economy following weaker-than-expected trade data - press.

- China National Financial Regulation Admin Head Li Yunze: To continue to support Shanghai as a financial center; China economy is continuing recovery.

- China PBOC Gov Yi Gang does not comment on monetary policy.

- CSRC Chairman Yi Huiman: China's internal vitality not yet strong, while global economy's uncertainty has increased markedly.

- China PBOC Vice Gov / SAFE Head Pan Gongsheng: China Govt bond yields have been less volatile than UST yields.

- US Treasury Sec Yellen to meet with US-China Business Council's Board at 16:30ET - press.

Japan

- Nikkei 225 opens -0.1% at 31,877.

- JAPAN Q1 FINAL GDP Q/Q: 0.7% V 0.5%E; GDP ANNUALIZED Q/Q: 2.7% V 1.9%E.

- Japan Apr Current Account: ¥1.9T v ¥1.650Te.

- Japan May Bank Lending Y/Y: 3.4% v 3.2% prior.

- Japan releases weekly flows data [period ended Jun 2]: Japan buying of foreign bonds ¥524.7B v ¥1.03T prior; - Foreign buying of Japan stocks: ¥610.9B v ¥379.2B prior.

- Japan May Tokyo Avg Office Vacancies: 6.2% v 6.1% prior.

- Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 50bps; Opens window to buy unlimited amount of 10-year JGBs at 0.50% [as expected].

- Japan PM Kishida: Reiterates to manage finances so markets do not lose confidence.

- Japan PM Kishida: To finalize fiscal policy plan in middle of June [overnight update].

South Korea

- Kospi opens -0.2% at 2,609.

-South Korea May Foreign Net Investment in Domestic Bonds (KRW): +10.9T [record high] v +4.7T m/m.

- South Korea Fin Min Choo: 2023 GDP growth might be below the forecast of 1.6%; not considering extra budget for now, will not do so for 'a while'.

- Bank of Korea (BOK) Official: Reiterates does not regard interest rate rises as over.

- Posco Int’l (047050.KR) unit chosen to supply Hyundai Motors for ~2.5M vehicle units for its next-gen EV platform between 2025-2034. [Stock jumps 15% to 9-year high on 5x regular volume].

- Samsung Electronics (005930.KR) Reportedly plans to raise NAND wafer prices DigiTime. [News did not help stock price, -1%].

Other Asia

- US to link up with Taiwan and Japan naval drone fleets to share real-time data – FT.

- Taiwan May Trade Balance: $4.9B v $4.9Be [overnight update].

- Singapore May Foreign Reserves: $325.7B v $312.0B prior (12-month high) [overnight update].

- Philippines May Foreign Reserves: $101.3B v $101.5B prior [overnight update].

- Thailand May Consumer Confidence: 55.7 v 55.0 prior.

- Indonesia Pres and Malaysia PM: Malaysia-Indonesia relationship progress "at extraordinary level".

- INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.50%; AS EXPECTED.

North America

- US TREASURY NOW EXPECTS THAT ITS CASH BALANCE WILL BE APPROXIMATELY $425B AT THE END OF JUNE; Initial increases in bill issuance will be focused on shorter-tenor benchmark securities and cash management bills.

- APR CONSUMER CREDIT: $23.0B V $22.0BE.

- BANK OF CANADA (BOC) RAISES INTEREST RATES BY 25BPS TO 4.75%; NOT EXPECTED (1st hike after ~5 month pause).

- 06/07 US TREASURY NOW EXPECTS THAT ITS CASH BALANCE WILL BE APPROXIMATELY $425B AT THE END OF JUNE; Initial increases in bill issuance will be focused on shorter-tenor benchmark securities and cash management bills.

Europe

- (EU) ECB’s Makhlouf (Ireland): More work is need on monetary policy in the short run to quell inflation.

- (UK) May RICS House Price Balance: -30% v -39% prior.

Levels as of 01:20 ET

- ASX200 -0.3%; Hang Seng -0.3%; Shanghai Composite flat; Nikkei 225 -1.0%; Kospi -0.7%.

- Equity S&P500 Futures -0.2%; Nasdaq100 -0.4%, DAX -0.2%; FTSE100 -0.1%.

- EUR 1.0696 – 1.0716; JPY 139.66 – 140.23 ; AUD 0.66.52 – 0.6673 ; NZD 0.6032 – 0.6056.

- Gold +0.2% at $1,961/oz; Crude Oil -0.1% at $71.47/brl; Copper -0.1% at $3.7525/lb.