OVERNIGHT NEWS
# US Treasury halts dollar debt payments from Russian government accounts at US banks. Russia will continue to receive payments for oil & gas as they are exempted from sanctions.
# Day ahead: US ISM services, Fed speaker Brainard, Romania to raise policy rate by 50bp to 3.0%.
# Australia: RBA statement drops ‘patient’ on raising interest rates, keeps CRT on hold at 0.10%. AUD/USD +1.1% at 0.7624 and 3y AGB yield +10bp to 2.48%.
# South Korea CPI accelerates to 4.1% yoy in March, 10-year high. BOK tears up 2022 inflation forecast of 3.1%, price growth likely to be “much higher.” USD/KRW offered at 1,210.
# Nikkei +0.2%, EUR 10y IRS +5.5bp at 1.22%, Brent crude +1.6% at $109.2/b, Gold flat at $1,931/oz
Romania forecast to hike 25bp today. Czech and Hungary lead monetary tightening in CEE.
Both central banks and EU leaders are preparing for action it seems. Holidays in China, Taiwan and Hong Kong did not deter the Asia session from busy market moves, with the RBA keeping rates unchanged but reforming the statement to more hawkish indications, causing AUD outperformance. The RBA removed the word “patient” in relation to the board’s stance on monetary policy among other changes, which caught markets by surprise. JPY saw brief gains when BoJ Governor Kuroda made a verbal intervention, though the yen remains vulnerable to broader risk dynamics.
Geopolitical risks remain in focus, with the European Commission set to announce its next package of sanctions on Russia – reports suggest that coal rather than oil and gas are on the cards, though we wait for official confirmation. Returning to central banks, we heard from Riksbank’s Floden who said that monetary policy is likely to be re-evaluated, but SEK is performing well due to broader risk stabilization. Next up, we have Fedspeak in the form of Brainard, Daly and Williams. As we have already heard recently from Daly and Williams, Brainard at 10:05 EDT may be more interesting – just before we get ISM services which may contrast to an unexpected decline in ISM manufacturing.
UST curve twist-steepens, 30y yields rise; Bunds outperform amid possibility of further sanctions on Russia; SF Fed President Daly says case for 50bp in May “has grown”; Lithuania is first EU country to cut off Russian gas; SNB weekly total sight deposits rise notably; US 10y at 2.395% (+1.3bp).
Latin America:
The performance of Latam currencies was relatively strong, supported by improved risk appetite and despite a relatively strong USD. COP was the best performer of the session, appreciating 1.34%, as polls released over the weekend indicated increasing support for a more orthodox-policy presidential platform and narrowing of the gap between the top two candidates. BRL was the second-best performing currency of the session, gaining ~1% despite a lack of new local developments. In contrast, PEN depreciated 0.42%, as local headlines remained relatively noisy, highlighting local strikes and road blockages. The price action in rates was also relatively positive across most curves, except for CLPxCAM, which mildly bear-flattened, partially retracing last week’s front-end gains. Colombia was also the outperformer in local rates, as 2y and 5y COPxIBR moved 25-28bp lower, supported by a more dovish Banrep and by the polls released over the weekend.