Speculation over Bank of Japan stimulus drives up bond yield

Speculation over Bank of Japan stimulus drives up bond yield

Speculation over Bank of Japan stimulus drives up bond yield

On Monday, China said it has no intention to devalue the yuan to help exports, after Washington said it was monitoring the currency's weakness amid the escalating bilateral trade brawl.

The behavior of the Central Bank of China represents the beginning of a currency war. The major traded 0.1 percent up at 1.3137, having hit a low of 1.2957 on Thursday; it's lowest since September 2017.

"Although U.S. equities edged lower on Friday and the yen strengthened, most cross-asset moves are supportive of APAC equities - particularly dollar weakness, strength in emerging markets FX, and a dramatic bear steepening of global yield curves".

The president also said he's "ready to go" with new tariffs on $500 billion of Chinese imports, which would be roughly the value of all Chinese goods imported to the U.S. a year ago.

Japan's Nikkei stumbled 1.3 per cent while South Korea's Kospi index slipped 0.8 per cent. In some relevant currency pairs, the Japanese Yen returned to vogue as traders sought safe havens, falling from above 1.13 all the way back to 111.40 against the USD at time of writing; and the AUD/USD rebounded 0.7 per cent following two days of being trounced to now trading back over the 0.7400 handle. The dollar index went as deep as 94.207 on Monday, the lowest in more than two weeks. "We have been ripped off by China for a long time", he said.

Oil price gains were capped however by oversupply fears.

US crude was last off 16 cents at $68.1 a barrel after posting its third straight weekly loss. Brent settled at $73.18, up 11 cents. The onshore spot yuan opened at 6.7524 per dollar and was changing hands at 6.7585 at midday, 279 pips firmer than the previous late session close and 0.01 percent stronger than the midpoint. USA gold futures for August delivery were 0.3 per cent higher at US$1,234.20 an ounce.

Highly liquid 10-year policy bank bonds issued by China Development Bank also saw a spike in yields, jumping 7 basis points to 4.2525 percent.

The Japanese 10-year government bond yields hit a 6-month high as investors' speculation rose over a possible change in the monetary policy by the Bank of Japan (BoJ) ahead of the central bank's two-day meeting on July 30-31. Onshore, the redback jumped 0.13 percentage point to 6.8218 at 3 p.m from the morning.

Roberto Perli, a partner at Cornerstone Macro LLC and a former Fed economist, says Trump's criticism of Fed rate hikes actually may have improved the likelihood that policy makers tighten as planned, to drive home their independence. The yield on Australia's benchmark 10-year Note, which moves inversely to it price, fell 5 basis points to 2.628 percent, the yield on the long-term 30-year Note also dipped 5 basis points to 3.096 percent and the yield on short-term 2-year down 2 basis points to 2.048 percent.

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