Yen Rallies With Yields on Ueda; Treasuries Slip: Markets Wrap

Asian currencies were in focus on Monday, with the Japanese yen rallying following remarks by the Bank of Japan governor that were seen as hawkish. The Chinese yuan appreciated after authorities there sent another forceful signal.

(Bloomberg) — Asian currencies were in focus on Monday, with the Japanese yen rallying following remarks by the Bank of Japan governor that were seen as hawkish. The Chinese yuan appreciated after authorities there sent another forceful signal.

The yen extended gains to 1% against the greenback after BOJ Governor Kazuo Ueda told the Yomiuri newspaper there may be sufficient information by year-end to judge if wages will continue to rise, which is a key factor in deciding whether to pare back its super-easy policy. The yield on the government’s 10-year bond jumped to 0.7%, the highest since 2014. The BOJ said it will conduct funds-supplying operations on Sept. 14 to curb the gains in yields.

Ueda’s hawkish comments may be intended to keep yen depreciation in check, Naomi Muguruma, chief fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, wrote in a note.

China’s onshore yuan rose for the first time in seven sessions after falling to its weakest since 2007 last week. Monday’s daily fixing was stronger-than-expected by a record margin.

Treasuries fell slightly across tenors Monday as traders await US inflation due later this week, coming on the heels of data that have continued to defy gloomy forecasts. Yield on the policy-sensitive two-year paper hovered at 5%, while that on the 10-year note climbed nearly three basis points to 4.29%.

Treasury Secretary Janet Yellen said she’s increasingly confident that the US will be able to contain inflation without major damage to the job market, hailing data showing a steady slowdown in inflation and a fresh influx of job seekers.

The strong growth outlook in the US and hawkish risks around its Fed-on-hold call led strategists at JPMorgan Chase & Co. to raise their year-end forecast for Treasury yields, with the target on the 10-year increased to 4.20% from 3.85%.

Asian equities traded mixed amid a lack of positive drivers. Shares in Hong Kong fell as trading resumed after a closure on Friday and property stocks there sank following disappointing earnings at Sun Hung Kai Properties Ltd. Equities in mainland China climbed to snap a four-day loss, with easing deflationary pressure and a report on more cities relaxing mortgage rules helping stabilize sentiment.

US stock futures ticked marginally higher following small moves in shares at the end of the week, with the S&P 500 edging higher after a three-day drop.

Offering Spree

Borrowers in Asia extended a recent global corporate bond offering spree at the start of the week. At least three firms were marketing dollar notes Monday, while two others had hired banks for potential deals.

The dollar fell against all of its Group-of-10 counterparts after its recent rally drove the currency to a record streak of weekly gains. The greenback has been bolstered recently by bets the Fed will keep interest rates higher for longer.

Elsewhere, Arm Holdings Ltd. is considering raising the price range of its initial public offering after meeting investors for what would be the world’s largest listing this year, according to people familiar with the matter.

Oil declined after a two-week rally and gold ticked higher.

Key events this week

UK jobless claims, unemployment, Tuesday
Eurozone industrial production, Wednesday
UK industrial production, Wednesday
US CPI, Wednesday
Eurozone ECB rate decision, Thursday
Japan industrial production, Thursday
US retail sales, PPI, business inventories, initial jobless claims, Thursday
China property prices, retail sales, industrial production, Friday
US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 12:59 p.m. Tokyo time. The S&P 500 rose 0.2% on Friday
Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 0.1%
Japan’s Topix fell 0.1%
Australia’s S&P/ASX 200 was little changed
Hong Kong’s Hang Seng fell 1.7%
The Shanghai Composite rose 0.6%
Euro Stoxx 50 futures were little changed

Currencies

The Bloomberg Dollar Spot Index fell 0.4%
The euro rose 0.2% to $1.0723
The Japanese yen rose 0.9% to 146.47 per dollar
The offshore yuan rose 0.5% to 7.3278 per dollar
The Australian dollar rose 0.6% to $0.6417

Cryptocurrencies

Bitcoin fell 0.3% to $25,732.2
Ether fell 0.4% to $1,611.81

Bonds

The yield on 10-year Treasuries advanced three basis points to 4.29%
Japan’s 10-year yield advanced five basis points to 0.700%
Australia’s 10-year yield advanced eight basis points to 4.16%

Commodities

West Texas Intermediate crude fell 0.6% to $87.01 a barrel
Spot gold rose 0.2% to $1,923.36 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Brett Miller and Masaki Kondo.

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