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• US Equities seen vulnerable to rising yields amid stretched valuations
• Treasury coupon auction sizes expected steady for now
• BOJ’s statistical data indicates that authorities likely intervened on Monday
• Interest rate differentials between EM Asia and US narrowed in Q1
• Recent rise in Brazil yields likely driven by a pass-through from Treasuries
• Türkiye reportedly will be imposing withholding tax on certain lira deposits
De-Risking into Fed May Day
Treasury’s quarterly refunding announcement brought little surprise ahead of the Fed meeting. This morning, as widely expected Treasury announced no change in coupon auction sizes from May to July as the refunding needs will be raised through bill issuance. Further, it guided for an eventual increase in coupon auction sizes. Treasury’s buyback program will start on May 29 with weekly operations with a volume of up $2.5bn for nominal coupon securities and TIPS. US labor market continues to accelerate as seen in an upbeat print of April ADP employment data this morning. The market reaction remained subdued as market participants have been bracing for a more hawkish Fed today for the last couple of days. Abroad, yesterday’s statistical data release from the Bank of Japan indicates that authorities likely conducted an intervention that reflects about 3% of the average daily yen trading volume. Latest aggregate euro area data shows that the region exited from a recession in the first quarter while aggregate core inflation remains more sticky which prompted market pricing to reduce the odds of a third ECB rate cut in 2024. Among emerging markets, the Colombian central bank continued its cutting cycle yesterday while today, many regional markets are closed in observation of Labor Day.
