日债30年期拍卖在即，日元异动与美债长端利率联动引关注

9:00 A.M. IN SHANGHAI, SHENZHEN AND HERE IN HONG KONG. YOU'RE WATCHING THE CHINA SHOW. I’M YVONNE MAN WITH DAVID INGLES WE ARE COUNTING DOWN TO THE OPEN MARKETS. A SURGE IN THE JAPANESE YEN. TRADERS ON HIGH ALERT FOR OFFICIAL INTERVENTION. ASIAN STOCKS GAINING. YVONNE: SHIPS AND FOCUS WITH THE U.S. SAID TO BE WEIGHING A FRESH ROUND OF TARIFFS ON IMPORTS. BROADCOM REPORTING SURGING AI CHIP SALES. DAVID: CHINA GOVERNMENT BOND SALES PUTTING THE FOCUS ON LIQUIDITY IN THE PBOC.

YVONNE: DID THEY OR DID THEY NOT INTERVENED? THAT IS THE BIG QUESTION. A MYSTERIOUS SURGE AROUND THE YEN OVERNIGHT. I THINK THAT REALLY WE WILL SEE IF THAT BODES WELL FOR THE 30 YEAR AUCTION LATER. DAVID: THE FOOTPRINTS WERE THERE WHEN WE WOKE UP. IT WAS WHO WAS ACTUALLY THERE WHEN THE YEN CROSSES WHERE IT IS CURRENTLY. WE DID SEE A SHARP MOVE, NOT AS SHARP AS THE ONE WE'VE SEEN ON THE ACTUAL INTERVENTION ITSELF. CERTAINLY ENOUGH TO TAKE NOTICE WHERE WE ARE. 158.67 IS WHERE WE ARE CURRENTLY.

WE'VE ALSO TAKEN A STEP DOWN ACROSS MOST OF THE KEY JAPANESE CURRENCY IS, WHICH I GUESS GOES INTO THE BOND STORY WE TALKED ABOUT. THERE IS A 30 YEAR BOND OPTION TODAY -- BOND AUCTION TODAY. THE APPETITE FOR THE LONG END, APPETITE FOR YEN EXPOSURE IS A KEY CROSS. THE JAPANESE 30 YEAR YIELD CURRENTLY AT 407. YVONNE: I THINK THIS JUST PUTS NOT JUST THIS BROUGHT AUCTION AND FOCUSED, THE SEPTEMBER BOJ MEETING IN FOCUS, IT IS ALMOST LIKE IT IS FULLY PRICED IN THE BOJ WILL HAVE TO HIKE AND SOON.

THAT WILL BE THE KEY FOCUS FOR IT HAS ALSO LIFTED THE LIKES OF THE KOREAN WON. THE OIL MARKETS, WE TRACK THAT GIVEN WHAT WE HAVE SEEN. IT SEEMS LIKE THERE IS NO END TO THE WAR. AND NO TALKS, OR AT LEAST LACK OF PROGRESS IN TALKS. WE ARE SEEING A 95 HANDLE WHEN IT COMES TO BRENT PRICES, SLIGHTLY COMING OFF SOME OF THE INITIAL HIGHS. SHANGHAI CRUDE REMAINS ELEVATED. GOLD FUTURES ALSO CATCHING AMID SOME OF THESE MOVES WITH THE YEN AND DOLLAR, COPPER FLAT.

DAVID: THIS ONE JUST CROSSING, CAN WE GET THE BOND BOARD BACK UP? LOOKING AT THE 407 LEVEL, AND SOMETHING WE HAVEN'T REALLY SEEN. WE ARE DOWN 10 ON THE JAPANESE 10 YEAR YIELDS. THAT HAS GONE RED ON THE BLOOMBERG TERMINAL. THIS RALLY ON THE LONG END OF THE JAPANESE CURVE AHEAD OF THAT , THE 30 YEAR BOND AUCTION LATER TODAY. THE PLOT THICKENS. ALL THAT TO SAY WHEN YOU LOOK AT THE MARKETS CURRENTLY, THE EQUITY MARKETS ARE RELATIVELY STEADY, RALLIED INTO THE CLOSE OF THE HANG SENG INDEX.

I THINK WHAT IS ALSO QUITE TELLING AS TO WHAT EXTENT CHINA ACTS AS AN ANCHOR. WE SEE IN THE BOND SPREAD BETWEEN THE CHINESE 10 YEAR YIELDS AND THE U.S. 10 YEAR YIELD ALMOST AT A RECORD. THE CORRELATION BETWEEN THE EQUITY MARKET, MSCI CHINA, MSCI WORLD. THE LOWEST. THAT HAS STARTED TO ACT AS AN ANCHOR. IN ANY CASE, THE DOLLAR-YEN, THIS IS WHAT WE WOKE UP TO THIS MORNING. TOKYO, THEN LONDON WAKES UP, AND THERE IS THIS OVERLAP BETWEEN LONDON AND NEW YORK.

WHEN NEW YORK WOKE UP OVERNIGHT INTO THE U.S. SESSION, THE CHARTS ABOVE SHOW THIS, 158.22 IS THE LOW ON DOLLAR-YEN. WE HAVE RETRACED SLIGHTLY TO THE UPSIDE. YES, DID THEY OR DIDN'T THEY? WERE THEY OR WERE THEY NOT? MARKET CRANFIELD IS WITH US TO HELP SHED SOME LIGHT ON THE BIG QUESTION. WAS IT A RATE CHECK COME OFFICIAL INTERVENTION OR SOMETHING ELSE, MARK? MARK: TO BE OR NOT TO BE A YEN TRADER, THAT IS THE QUESTION.

DIFFICULT FOR PEOPLE IN THE MARKET. I SUSPECT THEY DID NOT. TYPICALLY WHEN THERE IS INTERVENTION, YOU EXPECT THE DOLLAR-YEN TO MOVE AT LEAST 400, 500 PIPS. THAT MOVED ABOUT TWO HUNDRED. PROBABLY NOT INTERVENTION BUT THE MARKET WAS JITTERY. IT ALL STARTED WITH THE BANK COMMENTS EARLIER THE DAY. HE IS A KNOWN HAWK. PEOPLE EXPECT HIM TO BE ON THE AGGRESSIVE SIDE. HE HAS BEEN VOTING IN FAVOR OF INTEREST RATE HIKES, WHICH THE BOJ HAS NOT BEEN DELIVERING.

HE STILL INSISTS THAT IS THE RIGHT DIRECTION TO GO. YESTERDAY WHEN HE WAS SPEAKING HE FLOATED TO IDEAS WHICH WERE NEW IN THE CONTEXT OF WHAT WE HAVE HEARD RECENTLY. ONE WAS THE BANK OF JAPAN MAY CONSIDER MORE THAN 25 BASIS POINTS. HE WAS EMPLOYING 50 BASIS POINTS OR SOMETHING WITH THAT IN TERMS OF A RATE HIKE. OR THEY WOULD DO BACK-TO-BACK INTEREST RATE HIKES, SEPTEMBER AND OCTOBER, WHICH NOT MANY PEOPLE HAVE BEEN TAKING SERIOUSLY.

TWO THINGS FOR THE YEN TRADERS TO CONSIDER. THAT WAS CERTAINLY ENOUGH FOR THEM TO START BUYING THE CURRENCY YESTERDAY WHEN THERE WAS NOT TOO MUCH ELSE GOING ON ON THE FOREIGN-EXCHANGE WORLD. THAT GAVE THEM A GOOD EXCUSE TO DO IT. THIS IS ALSO A WEEK BEFORE LABOR DAY. TRADITIONALLY A LOT OF SENIOR TRADERS ARE OFF ON HOLIDAYS. IT WOULD BE A GOOD OPPORTUNITY FOR PEOPLE TO PUSH THE MARKET AROUND. MORE LIKELY SOME LARGE POSITIONS WERE UNWOUND RATHER THAN ACTUAL INTERVENTION.

SO AT LEAST ENOUGH TO GET PEOPLE EXCITED. WHEN YOU CONSIDER THE CONTEXT WE ARE COMING TOWARDS THE BANK OF JAPAN MEETING, WE HAVE A CHANCE THE NEXT COUPLE OF WEEKS FOR TRADERS TO PROBABLY PUSH THE YEN STRONGER, PARTICULARLY AGAINST THE EURO, MAYBE AGAINST THE POUND. A BIT MORE DIFFICULT AGAINST THE U.S. DOLLAR BUT THERE IS ROOM FOR THE YEN TO APPRECIATE IF PEOPLE THINK THIS IS A MEETING WHERE IT WILL AT LEAST DISCUSS A BIGGER INTEREST RATE HIKE THAN JUST 25 BASIS POINTS.

YVONNE: THE 30 YEAR BOND AUCTION IN JAPAN, WALK US THROUGH HOW IMPORTANT IT IS, WHAT ARE WE LOOKING AT THIS TIME AROUND? MARK: THIS IS A HUGE AUCTION IN GLOBAL TERMS. IT IS THE VERY LONG END OF BOND YIELDS WHICH HAVE UPSET MR. BESSENT, WHO GOT VERY EXCITED IN AMERICA TALKING ABOUT DOING BUYBACKS BECAUSE HE'S VERY CONCERNED ABOUT WHAT IS HAPPENING IN THE TREASURY MARKET. IF YOU TRACE BACK WHY U.S. TREASURY YIELDS HAVE BEEN RISING AT THE LONG END OF THE CURVE IT COMES BACK TO JAPAN.

A LOT OF RESEARCH ON BLOOMBERG THE LAST FEW DAYS SHOWING TERM PREMIUMS AND JAPAN HAVE BEEN RISING MORE QUICKLY THAN ANY OTHER PART OF THE G10 COMPLEX. RISING LONG TERM PREMIUMS IN THE U.S. -- IN JAPAN HAVE BEEN FILTERING THROUGH TO THE U.S., GERMANY, EVERYBODY IS AFFECTED BY WHAT IS CHANGING IN JAPAN. SO WHEN YOU HAVE A 30 YEAR AUCTION IN JAPAN, THE CONSEQUENCE IF IT DOESN'T GO WELL EVERYBODY IN THE REST OF THE GLOBAL WORLD HAS TO SAY THAT COULD BE A PROBLEM FOR US.

AS IT HAPPENS, THE CONDITIONS FOR TODAY'S SALE ARE QUITE DECENT. YIELDS ARE NEAR THE HIGH END OF THE RANGE. THEY ARE STILL ABOVE 4% AS WE SAW EARLIER. THERE ARE SIGNS A LITTLE BIT OF MONEY IS COMING BACK FROM OFFSHORE BACK INTO JAPAN. THERE IS SPECULATION THE BIG PENSION FUND G PIF WILL START TWEAKING ITS ALLOCATIONS MORE TOWARDS LONG-TERM DEBT IN JAPAN AS WELL. SO THINGS ARE FALLING INTO PLACE TO PROBABLY MAKE TODAY'S AUCTION A DECENT ONE IN TERMS OF JGB 30 YEAR.

I'VE SAID THAT BEFORE ABOUT AUCTIONS AND THEY HAVE NOT GONE WELL. IF IT DOES FAIL, IT'S PRETTY BAD NEWS FOR TREASURIES, FOR GERMAN CONTRACTS, FOR THE U.K., FOR MOST OF THE WORLD. BUT IT LOOKS AS THOUGH IT WILL PASS OFF OK AND THAT WILL BE A HUGE RELIEF. NEXT WEEK THE U.S. TREASURY IS DOING 10 YEAR AND 30 OR AUCTIONS AND THEY WON'T BE EASY EITHER. YVONNE: MARK CRANFIELD JOINING US, ALL THINGS TO WATCH ON JAPAN. LET'S BRING IN JASON PANG, PORTFOLIO MANAGER AT J.P.

MORGAN ASSET MANAGEMENT TO CONTINUE THIS CONVERSATION. THERE WAS A LOT OF TALK ABOUT THE AUCTION AND TERM PREMIUM COMING BACK. SHOULD WE EXPECT A NEW TRADING RANGE? JASON: I THINK THERE IS A COMPETING ASSET DYNAMIC GIVEN THAT WE SEE 30 YEAR HYPERSCALING . THAT IS COMPETING WITH GLOBAL GOVERNMENT BONDS. THE YIELDS AND SPREAD A PRODUCT ARE VERY ATTRACTIVE TO INVESTORS. I GUESS IN TERMS OF THE TERM PREMIUM COME UNTIL WE SEE SOME DEGREE OF FISCAL NORMALIZATION OR DISCIPLINE, I THINK THAT WILL REMAIN UNDER STRESS.

WHAT IS GOOD NEWS IS THE COMPENSATION IS THERE. THEY CAN PERHAPS IMPROVE NEAR-TERM WITH INFLATION AND OIL PRICES HIGHER. STRUCTURALLY SPEAKING WE THINK WITH ENOUGH VALUE CREATION THE CARRY COMPOSITION COMING FROM GOVERNMENT YIELDS OR HYPERSCALER PRODUCTS COULD OFFSET THE CAPITAL LOSSES. DAVID: IS THAT THE RECENT -- MY PEN JUST FELL. IS IT THE IDIOSYNCRASIES OF WHY THE LONG AND IS BLOWING UP? IS THERE ANYTHING ELSE THERE?

HOW ARE YOU LOOKI