Treasury Market Update - 6 July 2012

Treasury Market Update - 6 July 2012

• Do not be deceived that you woke up this morning and some levels are just the same when you left office yesterday because a lot has happened overnight and yes TGIF!

• USDMYR opened just a tad higher at 3.1650-3.1700 as anticipated the rate cuts would have an intial knee-jerk selldown reaction and demand for safety assets surface again. As it’s Friday we do not reckon there will be huge position building ahead of the weekend and expect USDMYR to stay in the tight range of 3.1500-3.1800

• A busy night in the markets with central banks taking the lead role-not only did we get the BOE’s additional 50bn pound boost to its asset purchase facility (now at 375bn pounds), we had the PBOC announce (like last time, a few seconds before the BOE announcement) a cut to its headline lending rate of 31bps and the deposit rate by 25bps.

• This sent risk assets soaring initially, with the FTSE rallying 0.5% and the AUD rallying 50 pips (it made a high of 1.0329). It was short lived though and by the time the ECB announced it’s widely anticipated 25bp cut an hour later markets were tanking again.

 

• The EUR suffered the most, it fell over a big figure from 1.2510 to as low as 1.2364, it has since stabilized at 1.2393 last, the ECB cut its benchmark rate by 25bps to 0.75% and its deposit rates to 0.00%!!

• After that we had the ADP non -farm payrolls figure which showed a 176k increase versus a 100k survey and last month’s 133k. It was to provide the briefest of inspiration for risk markets however as the S&P fell over 1% over the next hour before the ISM non-manufacturing PMI came out below expectations and the lowest since early 2010 at 52.1 versus last month’s 53.7.

• Overall markets were heavy, equities in the US falling with the S&P down 0.47% and the DOW down 0.36%, European bourses all fell excepting the FTSE which rose 0.14% (materials leading the way), The Euro Stoxx index was down 1.19% with Italy and Spain leading the falls.

 

• No hints of more bond buying from the ECB caused Italian and Spanish yields to rise 21 and 35bps on the night, now yielding 5.95% and 6.69% respectively. So markets have all pretty much erased the gains made on the back of last week’s political announcement, here’s the Euro chart since:

• German factory orders printed stronger earlier in the night and good news from Ireland as they successfully raised debt on the public markets for the first time since 2010.