Overnight Price Action
The S&P fell 1.2% in New York, but the combination of news that the White House is considering a temporary increase in the debt ceiling and news that President Obama will nominate Janet Yellen to replace Fed Chairman Bernanke have pushed S&P futures up 0.3% in Asia. Asian equity markets are mixed. The Nikkei and Kospi are up 0.4% and Shanghai is flat, but the HSI is down 0.6% and most SE Asia markets are slightly weaker.
The dollar is slightly stronger from late New York levels against the EUR and the JPY at 1.3566 and 97.29 respectively, but flat against the AUD at 0.9431. All EM Asia currencies have weakened against the dollar, led by a 0.4% fall in the MYR to 3.2085 to the dollar and a 0.3% easing in the KRW to 1076.49. USDCNY fixed 15pips higher to 6.143.
The US 10yr yield opened lower on the Yellen news, but at 2.6375, is now essentially flat to New York closing levels. JGB yields are virtually unchanged.Yields in most Asian rates markets are off 1 – 3bps. China is the exception.Liquidity tightening into the reserve maintenance period has pushed up the 7 day repo rate 10bps to 4.5% dragging up yields across the curve by 2 – 5bps.The liquidity squeeze should abate after 15 October.
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Credit Suisse