Relief JP 40-yr auction did Not fail – RBNZ 6th straight cut but more hawkish tone

Asia market update: Relief JP 40-yr auction did Not fail; RBNZ 6th straight cut but more hawkish tone; Chip-relateds follow US up; FOMC Minutes tonight and KR Rate Decision tomorrow.

General trend

- Relief that JGB 40-year auction was not canceled. [Still some support from prior session's report about possibility for reduced super-long supply?]. However yield came in even higher than expected at 3.1350% and a bid-to-cover of only 2.21x - the weakest demand since July 2024. JPY/USD pared back a little of its losses post-auction. 40 yr and 30-year JGB yields +10bps.

- Yields rise in NZ amid rare split vote. New Zealand’s RBNZ cut 25bps, as expected, for its sixth straight cut, but overall had a more hawkish tone in the Statement, indeed in a rare occurrence for the RBNZ one member dissented (preferring to hold) and the Bank did discuss a pause. NZ 2 yr +13bps, NZ 10-yrs +6.5bps after the decision with Kiwi dollar +0.3%. Acting Gov Hawkesby in his post-rate presser backed up the more hawkish tone by saying that future decisions to be driven by developments as Kiwi edge higher.

- Kospi again led Asia up today, as much as +2.1% to a new YTD high - in spite of any election uncertainty ahead Presidential elections to be held next week (Jun 3rd, Tue).

- In trade news, Japan reportedly willing to buy ¥1T of US-made chips as part of its US trade talks; Asia chip-relateds up strongly, incl Advantest, Tokyo Electron, and Korea’s Samsung, Hynix. (Moves likely also assisted by a weaker Yen down more than 2 Big Handles over the past 24 hours).

- Note that Nvida is also to report its FQ1 earnings preview tonight, after the US close, amid reports after the close today that its suppliers have resolved AI rack issues and are accelerating production. Likely having a positive effect on the chip ecosystem today.

- BOJ Gov Ueda and Fin Min Kato gave parliamentary testimony. Both reiterated they were looking at ultra-long term bond yields closely, with Ueda adding looking for any spillover to shorter-term yields. JPY/USD volatility up and down one Big Figure ahead of the much anticipated 40-year JGB auction today.

- Australia April CPI slightly hotter than expected, but little reaction in Aussie bonds or currency.

- Nissan planning a $7B fund raise, leveraging a potential UK export finance guarantee of £1.0B, as Co also says will sell partial stakes in AECD and Renault & Auto supply chain co AESC.

- In a policy shift that may alter how the Pharma industry has its products reviewed and published, HHS Sec Kennedy said the NIH may publish in-house rather than in JAMA, NEJM, Lancet, etc. "because they are all corrupt".

- US equity FUTs just slightly down during Asian trading after a very strong US session.

Looking ahead (Asian-weighted releases, using Asian time zone)

- (Wed night FOMC Minutes).

- Thu May 29th NZ May Business Confidence, JP May Consumer Confidence, KR BOK Rate Decision, (Thu night US Q1 GDP 2nd Est.).

- Fri May 30th JP Industrial Production & Retail Sales, AU Retail Sales, IN Q1 GDP, (Fri night US Apr Core PCE).

Holidays in Asia this week

- Mon May 26th (US Memorial Day).

- Thu May 29th Indonesia.

- Fri May 30th Indonesia, Taiwan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,409.

- Australia APR CPI Y/Y: 2.4% V 2.3%E.

- Australia Q1 Construction Work Done: 0.0% v 0.5%e.

- NEW ZEALAND CENTRAL BANK (RBNZ) cuts official cash rate (OCR) BY 25BPS TO 3.25%; as expected.

- RBNZ Acting Gov Hawkesby: Future decisions to be driven by developments; Considerable uncertainty around global economy - post-rate decision press conference.

- New Zealand Apr Filled Jobs M/M: -0.1% v +0.1% prior.

China/Hong Kong

- Hang Seng opens flat at 23,385; Shanghai Composite opens flat at 3,341.

- (HK) China to sell CNY12.5B of Sovereign Bonds in HK on June 4 (Wed).

- China Apr YTD State-owned Company Profits Y/Y: -1.7%; Rev flat.

- Latest rate cuts in China speed up deposit outflows into products including wealth mgmt - China Securities.

- China MOF: Apr Net Local Government Debt Issuance (CNY): 253.4B.

- Xiaomi (1810.HK) Reports Q1 (CNY) Adj Net 10.7B v 9.07Be, Rev 111.3B v 109Be; To open 10K new Mi Home stores overseas in next 5 years.

- PDD Reports Q1 $1.56 v $2.49e, Rev $13.2B v $14.2Be; Notes a slowdown in growth rate is expected as its business scales and challenges emerge.

- China Premier Li Qiang: Economic globalization is facing an unprecedented impact; We are facing decoupling and we must insist on resource sharing (speaking in Malaysia).

- China PBOC sets Yuan reference rate: 7.1894 v 7.1876 prior.

- China PBOC Open Market Operation (OMO): Injects CNY216B in 7-day reverse repos; Net injects CNY59B v injects CNY91B prior.

Japan

- Nikkei 225 opens +1.0% at 38,089.

- Japan sells ¥500B VS. ¥500B indicated in 40-year JGB bonds; yield at lowest accepted price: 3.1350% V 2.7100% prior; bid-to-cover: 2.21X V 2.92X PRIOR (weakest demand ratio since July 2024).

- Japan Economic Revitalization Min and Top Trade Negotiator Akazawa: Will not disclose concrete thinking about trade talks (presumably with the US) - financial press.

- Bank of Japan BOJ Gov Ueda: US-China trade 'truce' is positive development - parliamentary testimony.

- Japan BOJ’s Dep Gov Himino and US Fed's Williams (voter): Williams: Wants to avoid allowing highly persistent inflation - Fireside chat at BOJ Conference in Tokyo.

- Nissan plans $7B funding with backing from UK govt, as Co seeks UK export finance guarantee for £1.0B; Also looking to sell partial stakes in Renault, AESC.

- Japan said to propose buying US-made semi chips as part of US trade talks - Japanese press
[overnight update].

Korea

- Kospi opens +0.4% at 2,648.

- South Korea May Manufacturing Business Survey: 94.7 v 93.1 prior.

- South Korea Mar Retail Sales Y/Y: 7.0% v 9.2% prior.

- South Korea confirms FX market to also close on June 3 (Tue) for Presidential Election (equity and bond markets previously confirmed to be closed - financial press.

- South Korea said to place former PM Han and former Fin Min Choi under 'travel ban' – Yonhap [overnight update].

Other Asia

- Malaysia PM Anwar: Will introduce new legislation that enables AI to 'operate independently' from the laws of the country - comments at ASEAN-GCC Economic Forum 2025.

- Singapore 2024 wages +3.2% v +0.4% prior.

- Philippines Apr Budget Balance (PHP): 67.3B v -375.7B prior.

- Taiwan FSC reportedly to relax rules for life insurers on wealth management business - press.

- ASEAN members to monitor trade diversion risk, engage constructively with partners amid global uncertainty; Trade Fragmentation Response: ASEAN condemned rising unilateral trade actions, warning of their destabilizing effects and pledging coordinated responses via the ASEAN Geoeconomic Task Force [overnight update].

North America

- (US) HHS Sec Kennedy (RFK): NIH may publish in-house rather than in JAMA, NEJM, Lancet, etc. "because they are all corrupt" – press.

- (CA) Canada PM Carney: The US and Canada engaged in 'Fairly intensive' talks on new economic and security deal.

- (US) FHFA Dir Pulte: (US Fed Chair) Powell should lower interest rates now - post on X.

- US Pres Trump: Working on taking Fannie Mae and Freddie Mac public - Truth post.

- (US) White House official Hassett: Tariffs could go to 10% or less for some countries; We will probably see a few more trade deals, even this week.

- (US) Apr preliminary Durable Goods Orders: -6.3% V -7.8%E; Durables (ex transportation): 0.2% V 0.0%E; Capital Goods Orders (non-defense/ex-aircraft): -1.3% v -0.1%e.

- (US) MAR FHFA HOUSE PRICE INDEX M/M: -0.1% V 0.1%E.

- (US) MAR S&P corelogic house price index (20-CITY) M/M: -0.12% V 0.2%E; Y/Y: 4.07% V 4.5%E.

- (US) Q1 House Price Purchase Index Q/Q: 0.7% v 1.4% prior.

- (EU) US Pres Trump: Extremely satisfied with the 50% Tariff allotment on the European Union; EU has called to quickly establish meeting dates - Truth post.

- (US) Fed’s Barkin (non-voter for 2025): Data shows the economy is on the same trajectory.

- (US) May Consumer Confidence: 98.0 V 87.1E.

- (US) Atlanta Fed GDPNow: Lowers Q2 GDP estimate from 2.4% to 2.2%.

- (US) MAY DALLAS FED MANUFACTURING ACTIVITY: -15.3 V -23.1E.

- (US) Treasury $69B 2-year note auction draws 3.955% V 3.795% prior; bid-to-cover ratio: 2.57 V 2.52 PRIOR AND 2.64 over the last 12.

- (US) Fox's Gasparino: One issue the market isn’t digesting: Any adverse ruling against the Trump tariffs by the US Court of International Trade, which this week could rule on the legality of the trade agenda and at least put a hold on them until SCOTUS rules.

Europe

- (EU EC said to urge EU nations to cut water use by 10% by 2030 - FT.

- (UK) May CBI Retailing Reported Sales: -27 v -8 prior.

- (EU) ECB's Holzmann (hawk, Austria): ECB should pause further interest rate cuts until at least September, warning that “we should keep our powder dry” given the simmering EU-US trade war.

- (EU) ECB's Patsalides (Cyprus): Sees 50bp rate cut only if recession risks rise with stronger disinflation; Bigger rate cut is unwarranted now.

- (EU) ECB's Lane (Chief Economist): No one is talking about dramatic rate cuts, we're in a zone of normal central banking; Doesn't see key rate being cut below 1.5%.

- (EU) ECB’s Nagel (Germany): It's too soon to say if the ECB will cut rates again next week; Eurozone inflation within target at 2%.

- (CH) SNB Chair Schlegel: In the coming months we cannot rule out negative inflation in Switzerland; Trade uncertainties are currently enormous related to the tariffs from the US.

Levels as of 01:20 ET

- Nikkei 225 +0.3%, ASX 200 -0.2%, Hang Seng -0.4%; Shanghai Composite +0.1%; Kospi +1.6%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.1%; DAX -0.1%; FTSE100 -0.3%.

- EUR 1.1301-113.45; JPY 143.85-144.77; AUD 0.6426-0.6454; NZD 0.5924-0.5980.

- Gold flat at $3,328/oz; Crude Oil +0.6% $61.23/bbl; Copper -0.7% at $4.7115/lb.