JGB yield

A busy week ahead

By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  

The S&P500 ended last week on a meagre positive note, as the selloff in Apple shares slowed. Apple will be unveiling the new iPhone15 after the Chinese storm. Last week's selloff was certainly exaggerated. Once the Chinese dust settles, Apple's performance will continue to depend on the overall sentiment regarding the tech stocks, which will in return, depend on the Federal Reserve (Fed) expectations, the rates, energy prices, Chinese property crisis, deflation risks, and how that mix affects the global price dynamics.  

China announced this morning that consumer prices rose by 0.1% y-o-y in August, slower than 0.2% penciled in by analysts and after recording its first drop in over two years of 0.3% a month earlier. Core inflation, excluding food and energy prices, rose 0.8% y-o-y, at the same speed as in July, and remained at the fastest pace since January. The numbers remain alarmingly low, and the recent

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FX Daily: Dollar Bears Urged to Be Patient as Dollar Reconnects with Rate Differentials

ING Economics ING Economics 24.07.2023 09:26
FX Daily: Dollar bears being asked for patience Quiet summer markets are seeing dollar pairs consolidate in new, slightly lower ranges. It will be another quiet session today ahead of a big week for G3 central bank meetings. Dollar bears may find some reassurance from emerging markets, where the PBoC is trying to limit USD/CNY gains and the South African rand is holding up despite the lack of a rate hike.   USD: Dollar reconnects with short-term rate differentials As my colleague Francesco Pesole has been writing this week, the dollar has made a modest comeback as both US yields adjust higher and short-term rate spreads stay in the dollar's favour. In fact, one could argue that the dollar should even be a little higher given that two-year US yields have retraced about 50% of their drop in the first half of July and the DXY has only retraced one-third of its losses. Price action over the past week probably shows that a switch to the disinflation trade will not be easy and will require a constant drip feed of supporting evidence – be it softer price or weaker activity data. Yesterday's drop in US initial claims clearly did not help here. Casting around the world in quiet FX markets we see the People's Bank of China (PBoC) continuing to fight a weaker renminbi by printing lower USD/CNY fixings than model-based estimates suggest. Despite credible calls for a lower renminbi to support growth and battle deflation, it seems Chinese policymakers prefer to keep renminbi losses contained and prevent a 'sell China' mentality building. The PBoC's battle against a stronger USD/CNY is a slight dollar negative in quiet summer markets – especially should it extend to outright dollar sales. Today's session should be a quiet one as the market prepares for US Federal Reserve, European Central Bank and Bank of Japan (BoJ) meetings next week. Regarding the BoJ, expectations of any Yield Curve Control policy tweak seem very low (perhaps too low) given that the 30-year Japanese government bond (JGB) yield is drifting lower and the forward market prices 10-year JGB yields at 50bp in three months and at only 55bp in six months. These 10-year yields should be priced a lot higher were the market expecting a policy change. USD/JPY may well drift to the 141.15/142.00 area before next Friday's BoJ meeting.
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FX Daily: Dollar Bears Urged to Be Patient as Dollar Reconnects with Rate Differentials - 24.07.2023

ING Economics ING Economics 24.07.2023 09:26
FX Daily: Dollar bears being asked for patience Quiet summer markets are seeing dollar pairs consolidate in new, slightly lower ranges. It will be another quiet session today ahead of a big week for G3 central bank meetings. Dollar bears may find some reassurance from emerging markets, where the PBoC is trying to limit USD/CNY gains and the South African rand is holding up despite the lack of a rate hike.   USD: Dollar reconnects with short-term rate differentials As my colleague Francesco Pesole has been writing this week, the dollar has made a modest comeback as both US yields adjust higher and short-term rate spreads stay in the dollar's favour. In fact, one could argue that the dollar should even be a little higher given that two-year US yields have retraced about 50% of their drop in the first half of July and the DXY has only retraced one-third of its losses. Price action over the past week probably shows that a switch to the disinflation trade will not be easy and will require a constant drip feed of supporting evidence – be it softer price or weaker activity data. Yesterday's drop in US initial claims clearly did not help here. Casting around the world in quiet FX markets we see the People's Bank of China (PBoC) continuing to fight a weaker renminbi by printing lower USD/CNY fixings than model-based estimates suggest. Despite credible calls for a lower renminbi to support growth and battle deflation, it seems Chinese policymakers prefer to keep renminbi losses contained and prevent a 'sell China' mentality building. The PBoC's battle against a stronger USD/CNY is a slight dollar negative in quiet summer markets – especially should it extend to outright dollar sales. Today's session should be a quiet one as the market prepares for US Federal Reserve, European Central Bank and Bank of Japan (BoJ) meetings next week. Regarding the BoJ, expectations of any Yield Curve Control policy tweak seem very low (perhaps too low) given that the 30-year Japanese government bond (JGB) yield is drifting lower and the forward market prices 10-year JGB yields at 50bp in three months and at only 55bp in six months. These 10-year yields should be priced a lot higher were the market expecting a policy change. USD/JPY may well drift to the 141.15/142.00 area before next Friday's BoJ meeting.
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A Week Ahead: Market Insights and Key Events with Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank

Ipek Ozkardeskaya Ipek Ozkardeskaya 11.09.2023 10:54
A busy week ahead By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   The S&P500 ended last week on a meagre positive note, as the selloff in Apple shares slowed. Apple will be unveiling the new iPhone15 after the Chinese storm. Last week's selloff was certainly exaggerated. Once the Chinese dust settles, Apple's performance will continue to depend on the overall sentiment regarding the tech stocks, which will in return, depend on the Federal Reserve (Fed) expectations, the rates, energy prices, Chinese property crisis, deflation risks, and how that mix affects the global price dynamics.   China announced this morning that consumer prices rose by 0.1% y-o-y in August, slower than 0.2% penciled in by analysts and after recording its first drop in over two years of 0.3% a month earlier. Core inflation, excluding food and energy prices, rose 0.8% y-o-y, at the same speed as in July, and remained at the fastest pace since January. The numbers remain alarmingly low, and the recent stimulus measures announced by the government did little to boost investors' appetite. The CSI 300 was thoroughly sold on the rallies following stimulus news. And the yuan continued trending lower against the US dollar.  The US dollar is under a decent selling pressure this morning, particularly against the yen, after comments from the Bank of Japan (BoJ) Governor Ueda were interpreted as being 'hawkish'. Ueda said that 'there may be sufficient information by the year-end to judge if wages will continue to rise', and that will help them decide whether they would end the super-loose monetary policy and step out of the negative rate territory. The remarks were disputably hawkish, to be honest, but given how negatively diverged the Japanese monetary policy is, any hint that the negative rates could end one day boosts hope. The 10-year JGB yield jumped 5bp to 70bp on the news, and the USDJPY fell to 146.30. The USDJPY has a limited upside potential as the Japanese officials have been crystal clear last week that a further selloff would be countered by direct intervention. But the pair has plenty of room to drop significantly, when the BoJ finally decides to jump and leave the negative rates behind.   This week, the US inflation numbers will give the dollar a fresh direction, and hopefully a softish one. The headline inflation is expected to tick higher from 3.2% to 3.6% in August, on the back of rising energy prices, while core inflation may have eased from 4.7% to 4.3%. 'We've gotten monetary policy in a very good place' said the NY Fed President Williams last week. Indeed, the Fed hiked the rates by more than 500bp and shed its balance sheet by $1 trillion, while keeping the GDP around 2%, as inflation eased significantly from the 9% peak last summer to around 3% this summer. But crude oil cheapened by more than 40% between last summer and this spring, and the prices are now up by nearly 30% since then. The Fed will likely hold fire when it meets this month, but nothing is less sure for the November meeting. This week's inflation data will be played in terms of November expectations.   For the European Central Bank (ECB), the base case scenario is a no rate hike at this week's monetary policy meeting, but the European policymakers could announce a 25bp hike despite the latest weakness in economic data. The EURUSD is slightly better bid this morning, expect consolidation and minor correction toward the 200-DMA, 1.0823, into the meeting. The ECB, unlike the Fed, is not worried about surprising the market, on one side or the other. A no rate hike – even if it's a hawkish pause - could push the EURUSD to below 1.0615, the major 38.2% Fibonacci retracement, into a medium term bearish trend whereas a 25bp hike should trigger a rally toward the 1.09 level.   On the corporate calendar, ARM will go public this week, in what is going to be this year's biggest IPO. The company is expected to price on the 13th of September with a price range of $47-51 per share, and will start trading on Nasdaq the following day. ARM is expected to be valued at around $52bn, roughly 20 times its last disclosed annual revenue on expectation that the chips needed to power the generative AI will make ARM a sunny to-go place. Hope it won't be stormy.  

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