U.S. Treasury's Plan to Increase Buyback Volumes Partially Quells Investor Concerns — Market Talk

0517 GMT - Long-duration U.S. government bond yields moved lower Wednesday, suggesting that the Treasury's decision to buy back more of its long debt has had an effect in partially quelling investors' anxieties, says Russell Investments' BeiChen Lin. Russell's trading team, however, notes that demand for the Treasury's 20-year bond auction was among the weakest since the February refunding, meaning that investors still have some lingering questions about holding long-duration bonds. "Although we believe the near-term run-up in inflation to be temporary, the market appears to still be wondering how the Federal Reserve will get inflation sustainably back down to the 2% objective," the head of Canadian investment strategy says. ([email protected])0506 GMT - Australia's monthly employment data is highly volatile, but cutting through the noise, the unemployment rate is trending higher, tracking slightly above the Reserve Bank of Australia's latest forecasts, says Mary Jo Vergara, senior economist at RBC Capital Markets. Broader measures of slack in the market also keep climbing, she adds. Sluggish results should continue with business confidence weak and employment intentions softening. Despite all this, messaging from the central bank remains hawkish. Inflation data next week will therefore be critical, she adds. ([email protected]; X @JamesGlynnWSJ)0427 GMT - Demand for 20-year Japanese government bonds weakened at Thursday's auction compared with the previous sale, reflecting a broad decline in yields that followed moves in U.S. Treasurys. The auction's tail--the difference between the average and lowest accepted prices--widened to 0.17 from zero at the previous auction in July, signaling softer investor appetite. The bid-to-cover ratio, another gauge of demand, dropped to 3.98 from 4.52 last month. JGB yields declined sharply across the curve Thursday after Treasury yields pulled back overnight on the U.S. government's announcement of plans to buy back more longer-dated bonds. The 20-year JGB yield was last down 8.5 bps at 3.690%. ([email protected])0343 GMT - Diplomatic tensions between Malaysia and Taiwan are likely more of a medium-term FDI-confidence and equity market sentiment risk than an immediate macroeconomic shock, Apex Securities analysts say in a note. Tensions flared after Malaysian Prime Minister Anwar Ibrahim described Taiwan as a Chinese province seeking independence, drawing a rebuke from Taiwan. Existing trade and semiconductor links are expected to remain resilient, with limited near-term impact on corporate earnings, the analysts say. However, prolonged tensions could make Taiwanese companies more cautious about new investments, particularly in Malaysia's semiconductor and E&E sectors, they add. ([email protected])0303 GMT - Bitcoin rises in Asian trading. The cryptocurrency is recovering, reaching its highest level in 10 days after lagging behind major stock indexes all summer, Bitfinex analysts say. The digital asset has been supported by renewed buying through spot Bitcoin ETFs, which attracted almost $490 million over the past two sessions. Meanwhile, selling pressure appears to be easing as many investors looking to take profit have already done so. Bitfinex says long-term holders are selling at small losses, while recent buyers are mostly selling around their purchase price. The reduced selling pressure is giving renewed ETF demand more room to push Bitcoin prices higher, the analysts say. Bitcoin last trading 0.3% higher at $69,297.60. ([email protected])0244 GMT - The Singapore dollar weakens slightly against its U.S. counterpart in the Asian session as traders weigh the Treasury Department's announcement Wednesday that it will buy back more of its longer-term debt in a bid to contain sharp rises in borrowing costs. "Given that the additional buybacks are very small and there is also no change in [U.S.] monetary policy, the USD is more likely to consolidate today rather than track lower," Chang Wei Liang, foreign-exchange and credit strategist at DBS Group Research, says in a commentary. The U.S. dollar edges 0.1% higher to 1.2718 Singapore dollars, LSEG data show. ([email protected])0203 GMT - Japan's imports should normalize over the longer term if Middle East tensions ease and energy prices cool, says Mizuho Securities economist Yasuhisa Irie. "As energy prices drop and import volumes stabilize, overall import values will likely settle back down to pre-conflict levels and move generally flat," he notes. While trade deficits may persist in the near term, Japan's trade balance is expected to gradually improve, reflecting a slowdown in energy costs, Irie adds. Japan's imports rose 27.8% from a year earlier in July, government data showed Thursday. The import growth highlights progress in the Japanese government's efforts to secure alternative oil sources.([email protected])0155 GMT - The dollar is attempting to hold above 158 yen, which is near the weekly "S1" pivot point on technical charts, StoneX's Matt Simpson says in commentary. If the greenback can manage a minor bounce against the yen, dollar bears may seek to "fade into moves towards resistance areas" versus the yen, the senior market analyst says. These include the dollar's resistance area around Y158.60 or the weekly pivot point around Y158.80, Simpson says. On the downside, a dollar break below Y158 brings the weekly volume point of control at Y157.65 into focus, the analyst adds. The dollar is 0.2% higher at Y158.53, LSEG data show. ([email protected])0141 GMT - Japan's exports are likely to remain resilient over the longer term, supported by steady economic growth among key trading partners, says Mizuho Securities economist Yasuhisa Irie. Robust investment in artificial intelligence should continue to drive solid U.S. demand for Japanese semiconductor-related products, Irie notes. However, U.S. tariff policies will likely weigh on other shipments, leaving Japan's overall trade surplus with the U.S. generally flat, he adds. "Exports to other countries and regions are also expected to remain on an uptrend thanks to firm economic fundamentals." Japan's total exports rose 23.2% from a year earlier in July, government data showed Thursday. ([email protected])0124 GMT - The U.S. Treasury's slew of measures including its announcement to buy back more longer-term debt points to softer dollar, says State Street Investment Management's Masahiko Loo in an email. "While these steps may improve market functioning, they do little to change the bigger picture of inflation and fiscal concerns, rising term premiums, and AI-driven capital demand," the senior fixed income strategist says. "In the grand scheme of things, that points to a softer dollar and continued support for gold, as investors revisit de-dollarization and currency debasement concerns," Loo adds. U.S. Dollar Index is steady at 98.871, LSEG data show. ([email protected])0122 GMT - Japan's trade deficit is likely to persist in the short term as high energy prices keep import costs elevated, says Mizuho Securities economist Yasuhisa Irie. Until passage through the Strait of Hormuz normalizes, import prices will remain high, Irie notes. Even if Middle East tensions ease and supply constraints lift, a rebound in import volumes could significantly expand total import values, he adds. "Exports are expected to continue expanding thanks to robust AI-related investment. However, the potential surge in imports triggered by eased supply constraints will likely outpace export growth, keeping the trade balance in the red overall." Japan recorded a 634.5 billion yen deficit in July, government data showed Thursday.([email protected])0048 GMT - Asian currencies are mixed against the dollar, but may be buoyed by the U.S. Treasury Department's announcement on Wednesday that it'll buy back more of its longer-term bonds. The dollar seems to be under pressure, strategists at OCBC Group Research say in a research report. The Treasury's announcement "helped cap long-end U.S. yields," they say. It "signals Treasury's discomfort with the rise in long-term yields and should help restrain further increases in long-end yields in the near term," they add. The U.S. dollar falls 0.3% to 4.0420 ringgit, but is little changed at 1.2713 Singapore dollar and is 0.2% higher at 1,390.70 won, LSEG data show. ([email protected])