Treasuries saw a thin but positive European session as yields dipped sharply in reaction to Sunday's French and Greek elections. There was no domestic data to drive the trade in NY hours, but Tsys gave up gains amid an equity retracement, with inbound long-end supply weighing on the curve. The market dipped back to flat into the European close and remained there into the close. 2s unch @ 0.25%, 5s unch @ 0.78%, 10s unch @ 1.88%, 30s unch @ 3.07%. US equity futures fully reversed losses driven by Europe with subsequent trade quiet with little domestic news. The S&P closed up a marginal 0.04%. Though Dow closed -0.23% at 13,008.83 - just above key 13,000.
Asian bourses may see some recuperation after yesterday's bloodshed, while profit taking in USD/Asians should help restrain bulls in today's session, alongside the bounce in EUR/USD. On the data front, South Korea PPI retreated to a 26-month low of 2.4% y/y in April following a decline in food costs. Lower inflation readings may provide room for BOK to keep policy rates at accommodative levels in the upcoming MPC meeting.
OVERNIGHT NEWS HIGHLIGHTS
- US: Mar consumer credit +$21.4bn versus expected $9.8bn.
- Gold Spot: $1,638.55/oz (-0.22%)
- ICE Brent front contract: $113.16 ($-0.02)
- Nymex WTI front contract: $97.94 ($-0.55)
- Reuters/Jefferies Commodities Index: 297.46 (+0.10%)
- 10y UST: 1.872% (-1bp)
- DJI: 13,008.53 (-0.23%); S&P: 1,369.58 (+0.04%); Nasdaq: 2,957.76 (+0.05%)
ASIA NEWS
- China: Historical evidence shows it's possible to see the exchange rate overshooting when a currency reaches an equilibrium, which would hit the economy badly, according to Yi Gang, head of SAFE; he added that China cannot rue out the possibility of this happening and should strictly guard against it.- Caixin Media
- China: Beijing authorities rejected the applications of 14,000 home buyers last year as part of efforts to curb housing prices. More than 90% of approved home buyers were first-time buyers (Xinhua).
- South Korea: PPI eased to 26-month lows at 2.4% y/y in Apr (prev: 2.8); -0.1% m/m.
- Singapore: SGX Chairman Chew Choon Seng said the Singapore Exchange is not bidding for London Medal Exchange.
- Malaysia: According to the Malaysia Palm Oil Board, the country may announce a plan in the near future to compete with top supplier Indonesia which reformed its export taxes to boost its refining industry.
- Indonesia: BI Dep Gov Halim Alamsyah said that the economy can grow 6.3-6.5% in Q2.-BBG
- India: RBI eases rules for miscellaneous purpose FX remittance.-BBG
- India: The country plans a 20% cut in Iran oil imports this fiscal year, with Secretary of State Clinton pressing India to cooperate with U.S.-led sanctions against the Middle Eastern nation.- BBG
- Philippines: Oil firms plan to cut pump prices. -ABS-CBN
CURRENCIES:
- EUR/USD post weekend FX reaction reached its zenith in the Asia session, hitting a low of 1.2955 in direct response to the socialist win (Hollande) in France, and the loss of 'power' by the 2 main parties in Greece. Through Monday's European session, the EUR looked to recover across the board, with Middle East accounts were doing much of the buying. A further prop for the EUR came in the form of a strikingly strong set of factory orders for Germany. EUR/USD stabilized around 1.3055.
- USD/JPY was held within 79.50-80.00 limits through the day, but moved towards the upper end. EUR/JPY was more active, falling to 103.22 before retracing the bulk of the los ses.
- GBP/USD came within striking distance of 1.62 as EUR/GBP, which had earlier fallen to 0.8033, recovered less of its losses than EUR/GBP. It was no surprise to see the SNB soaking up all the pressure at 1.2000 in EUR/CHF.
Treasuries saw a thin but positive European session as yields dipped sharply in reaction to Sunday's French and Greek elections. Focus fell on the Greek elections, where a splintering of the leading parties has the market worried that the country will not pursue its austerity track and that the bailout will unravel. There was no domestic data to drive the trade in NY hours, but Tsys gave up gains amid an equity retracement, with inbound long-end supply weighing on the curve. The market dipped back to flat into the European close and remained there into the close. 2s unch @ 0.25%, 5s unch @ 0.78%, 10s unch @ 1.88%, 30s unch @ 3.07%.
- Agency Spreads: Freddie/Fannie 2s +0.2/+0.2 bps, 5s -0.7/-0.1 bps, 10s -0.4/-0.4 bps.
- Swap Spreads: 2s +0.62bps, 5s 0.00bps, 10s -0.25bps.
EQUITIES:
US equity futures fully reversed losses driven by Europe with subsequent trade quiet with little domestic news. Financials outperformed. Oil and gas were initially underperforming on price losses but recovered to near neutral as oil prices came off their lows. The S&P closed up a marginal 0.04%.
NORTH ASIA
USD/CNY: 1Y NDF stabilized mostly in the 6.3500-6.3550 region overnight before seeing fluctuations in the wider 6.3450-6.3550 band this morning. Pair is poised for some choppy trading though gains are likely to fade in the session with topsides guarded by the 6.3600 mark.
USD/HKD: Spot remained largely supportive in overnight trades in the 7.7610-7.7640 region, though the initial recovery in EUR/USD and potential rebound in stock markets may help upward momentum dissipate; 7.7640 is likely to cap topsides in the near-term.
USD/ TWD: Minimal overnight 1M NDF trades dealt at 29.27 and closed lower at 29.26/29.29 from 29.29/29.32 at open. Corrective upmove in spot is likely to find resistance at 29.355, while pair may see slippage towards the 29.241 support in the coming session.
USD/KRW: High volume of overnight 1M NDF trades dealt in the 1136.50-1138.50 range and closed lower at 1136.00/1137.00 from 1138.50/1139.50 at open. Spot is likely to see some hindrance to further upticks on potential profit taking and a firmer EUR/USD. Look for a test of the 1137.60 support, ahead of 1135.65.
SOUTHEAST ASIA
USD/SGD: Pair glided throughout the overnight session to trade slightly above the 1.2450 support on the back of a firmer EUR/USD. Spot prices are likely to be biased on the downside, with topsides capped by the 1.2475 mark.
USD/MYR: Moderate volume of 1M NDF trades overnight in the 3.0590-3.0610 range and closed a tad firmer at 3.0590/3.0620 from 3.0580/3.0610 at open. Spot to see upsides restricted today while pair may test the 3.0500 support ahead of 3.0465.
USD/IDR: Minimal trades on the overnight 1M NDF front, and pair closed lower at 9275/9285 from 9290/9300 at open. Spot is likely to see upsides fade further, with 9240 acting as the resistance and 9203 as the immediate support.
USD/THB: Onshore markets return from the long-weekend. Spot saw narrow range trades around 30.90-31.05 in the overnight session and oscillated at the 31.0 mark this morning. 31.055 resistance should cap topsides today, with subsequent trade action may be biased on the downside.
USD/PHP: 1M NDF saw moderate volume of trades in the 42.37-42.44 range and closed lower at 42.35/42.41 from 42.45/42.50 at open. Spot may open softer, with subsequent trades to be restricted by the 42.440 hurdle. Look for a possible break of the 42.320 support.
USD/INR: 1M NDF saw high volume of overnight trades in the 53.28-53.35 range and closed lower at 53.23/53.28 from 53.28/53.32 at open. Spot tumbled in the previous session on overbought conditions, also fanned by Finance Minister's comment on GAAR. We do not rule out further downsides, with 52.865 support at risk ahead of 52.585.
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