From Marc to Market:
Overview: Yields are surging. Canada and Australia's two-year yields have jumped 20 bp, with the US yield up 10 bp to 2.37% ahead of the $50 bln sale later today. The US 10-year yield has risen a more modest three basis points to 2.50%, flattening the 2-10-year yields curve. The 5–30-year curve has inverted for the first time since 2016. European 10-year benchmark yields have risen 3-7 bp. Tech stocks helped power the Hang Seng and Australia eked out a small gain, but most equity markets in the Asia Pacific region sold off for third consecutive session. Led by financials, utilities, and communication, the Stoxx 600 has risen by about 0.75% in the European morning. US futures are trading with a heavier bias. The greenback is firm, with the yen again under the most pressure. It is trading briefly above JPY125 in late morning activity in Europe, before pulling back. The Australian dollar is the only major currency higher on the day. Emerging market currencies are mostly lower. The South Korean won, and Thai baht are hardest hit alongside the Polish zloty.
The jump in yields takes some shine off gold, which reached $1966 last week. It is now straddling the $1930 area. The $1900 area may offer important support. The lockdown in Shanghai is sparking concerns about oil demand. May WTI is off almost 4% after last week's 10.5% rally. There is also speculation (hope) that OPEC+ agrees to boost output at this week's meeting. US natural gas prices are little changed after rising in every session last week. Europe's benchmark has risen by a little more than 8% today after falling 2.4% last week. Iron ore is a little firmer, while copper is falling for the third session in a row. May wheat is offered, giving back 2.4% after last week's 3.6% a rally.
Asia Pacific
The Bank of Japan entered the market to reinforce the 0.25% cap of the 10-year yield. Its first offer to buy an unlimited amount of bonds failed to draw any interest. The second attempt had to buy JPY64.5 bln (~$525 mln). The BOJ recognizes it is engaged in a struggle now and has pre-announced will be there for the next three sessions. Separately, we note that according to the latest Nikkei poll, support for Prime Minister Kishida has risen six percentage points to 61%, with high marks given for handling the Russia's invasion of Ukraine.
On the one hand, China rejects the sanction regime against Russia, it says, because it is being imposed with a UN resolution. On the other hand, reports suggest the Beijing and mainland companies are asking US officials for clarification with the idea in mind to understand what is permitted. China and India purchases, for example, of Russian oil is not violating the sanctions.There was thought that China would abandon its strict zero-Covid course. Some suggested that the easing of restrictions in Hong Kong could be a prelude to a change by Beijing. However, that does not appear to be the case. Yesterday, Beijing announced a lockdown of Shanghai, China's largest city (population estimated around 25 mln). The eastern half of city will be locked down for four days starting today. This covers the financial district. The purpose is mass testing. The western half of the city will be locked down as of April 1. Residents will be barred from leaving home and public transportation and ride-hailing services will be halted. A record 5500 cases were said to have been reported on Saturday. Recall that earlier this month, Shenzhen, an important tech hub was locked down....
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