U.S. Treasury auctioned off $61 billion of 10 year notes at a high yield of 0.788%

WI at time of auction was at 0.794%

  • High yield 0.788%.
  • WI at time of auction 0.794%.. Tail -0.6 bps
  • Bid to cover 2.49x. Six month average 2.34 times
  • Dealers 20.78%. Six month average 26.3%. Smallest amount since September 2020
  • Indirects 64.4%.  Six month average 57.9%
  • Directs 14.9%. Six month average 15.8%
Grade: B+/A-
  • Yield was below the WI level at the time of auction by -0.6 basis point
  • Dealers are saddled with much less than the average at 20.78% versus 26.3%
  • The foreign demand as measured by indirect bidders shows strong demand at 64.4% versus 57.9%.
  • Bid to cover was comfortably above the six month average as well at 2.49x vs 2.34x
The cycle high in the five year yield reach 0.988% back in April. The low move down to 0.89% (that was the all-time low yield). The yield remains above its rising 100 hour moving average at 0.699%.
Rick Santelli on CNBC David a grade of A-
US five year yield

Be sure to keep an eye on the Chinese yuan in the days ahead

The yuan is trading below 6.40 against the dollar

That applies to both the offshore and onshore yuan now, with the latter also breaking to its highest levels since 2018 as it trades past 6.40 against the dollar now.
As mentioned yesterday, the thing to note here as well is that Chinese officials and media are not really offering much pushback to the latest strengthening in the currency so that may pave the way for further gains in the bigger picture.
For this week, keep an eye on the PBOC fix in the coming days. If the Chinese central bank is comfortable with a push below 6.40, that’s the first green light.
And in turn, this could translate to some selling in the dollar as well.

China to limit some corn imports and cancel some US shipments on domestic blending issues

China easing up on agriculture spending

China easing up on agriculture spending
The US and China are set for trade talks and it looks like China will play tough. They’ve undershot trade targets in this deal, partly owing to the pandemic but now it sounds like they’re going to play hardball.
The cargoes are said to be less than 1 million tons compared to the 20 million tons that have been purchased this season.
This has caused a bit of risk aversion but the report highlights that it’s more of a domestic issue that part of trade talks. Chinese businesses are evidently shipping corn into free trade zones and blending them for animal feed — something that avoids import tariffs.
I don’t think this dip will last.

BREAKING :China regulator reportedly calls on banks to unwind retail exposure to commodities-linked investment products

Reuters reports

The report says that China’s banking regulator has asked lenders to stop selling investment products linked to commodities futures to “mom-and-pop” buyers in order to curb investment losses associated with such products amid volatile prices.

Adding that the regulator has asked banks to unwind existing positions on these products, citing three sources familiar with the matter. One source said that:

“The risk contained in banks’ commodity-linked investments cannot be easily spotted by ordinary investors, neither can they bear it. Banks also don’t have enough expertise to run such products properly.”

This adds to the measures by Chinese authorities as of late to try dial down the speculative rise in commodity prices in general, as seen here.

Japan ruling party official says BOJ must seek to weaken yen further

LDP senior official Yamamoto

  • Japan likely to proceed with Olympics as scheduled even without spectators
  • holding Olympics as planned is good for Japan’s economy
  • government should compile extra budget worth 26 trln yen around Oct or Nov
  • Japan ‘absolutely’ does not need to keep pledge to achieve primary balance surplus in 2025
  • Bank of Japan must seek to weaken yen further by ramping up asset buying
  • BOJ is making a mistake by ‘stealth’ tapering of asset buying as deflation still a risk
Kozo Yamamoto is no lightweight, he heads the Liberal Democratic Party’s (LDP) financial research committee.
Yen is off a few ticks only.
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