Citi

European Open

It was all about rates on Monday morning in Asia. UST yields surged in a bear flattening move, with 2y yields up 9bps, while US 5s30s inverted for the first time since 2006, according to Bloomberg. Global rates markets were brought along for the ride. Early Asian trading also saw JGB trade at 0.245%, close to the 0.25% threshold of the BoJ. A BoJ bond purchase offer announcement was seen shortly afterwards, with the intervention sending USDJPY soaring. In FX, USD saw a bid, with only AUD in the green in G10. JPY saw the biggest losses, as mentioned earlier, while NOK, CHF and NZD also saw significant losses. NOK was especially affected by a dip in oil prices as Houthi rebels paused hostilities against Saudi Arabia, and concerns over demand rose over China’s covid situation. Shanghai started a 2-phased lockdown, with the Shanghai financial district part of the lockdowns that started today. The Shanghai Stock Exchange was still trading and said it would provide online services, while factories were closed.

Looking ahead, we note that Russia-Ukraine talks are set to continue in Turkey today. NOK and GBP will see Deputy Governor Borsum and Governor Andrew Bailey respectively, with both potentially of significant interest to markets. HKD and MXN will look forward to trade balance data.

USD found a bid in Asian markets today, supported by higher UST yields. G10 currencies were mostly down against the dollar with the exception on AUD. Losses were led by JPY, NOK and CHF, which we elaborate more on below

UST yields surged, continuing the momentum from last Friday. The bear flattening move saw 2y yields lead the move at +9bps, with 30y yields at +5bps. We note that 5s30s have inverted for the first time since 2006, according to Bloomberg. UST trader Hideyuki Liu elaborates below:

–The strong momentum downwards for treasuries continues, following an absolute bloodbath on Friday that saw 5y sell off over 20bp and 10y yields near 2.5%. Today, 10y yields have broken above that 2.5% level in yet another major bear flattening move with 2y and 3y yields both selling off over 10bp from the NY EOD levels in another aggressive bear-flattening move. 5s30s have inverted for the first time since 2006, in a day when JGBs were also lower despite the announcement twice over of the Bank of Japan's unlimited fixed-rate operation. The most striking thing about the move in front-end is the utter lack of volumes going through in cash despite the magnitude of the move, with each tenor only trading touch above 1bn on the day, while 5y and 10y have seen volumes transacted of 4bn and 3bn respectively. Desk flows have been skewed to much better selling by both RM and FM, but has been focused in long-end, not front-end

Oil prices have dropped on open partly as a result of Houthi rebels pausing hostilities against Saudi Arabia on Saturday in a three day truce, while China’s troubles with Covid have raised concerns on demand from the world’s largest crude oil importer. WTI was trading at -2.90% and Brent was seen trading at -2.58%. NOK saw losses of 0.40% alongside crude oil prices.