JGBS: 10Y Leads Yields Lower, Hike Fully Priced By July

The BBDXY range overnight was 1204.43 - 1206.96, Asia is currently trading around 1205, -0.02%. The USD continues to find support between 1204-1205 but has still failed to react to a weakening risk backdrop. Is it lagging or is it waiting for clarity from postponed US data tonight. The supreme court decision regarding tariffs continues be be a headwind but it looks like it might now be a problem for early 2026 though the tail risk of an early decision does still exist. On the day look for initial resistance again back towards the 1208-110 area and above here the more important 1213-1216 area where sellers should remerge initially. Support is in the 1204/05 area; a move below here would target 1198-1200. 

• MarketWatch is reporting: “A burning question now is, when will the court rule? As of Monday, halfway through the last month of the year, there’s nothing on the Supreme Court’s schedule after an order list was released in the morning. That suggests any ruling won’t come before 2026.”
• “Based on prior practice, it’s looking like they render the decision in 2026,” Holly Froum from Bloomberg Intelligence said in comments emailed to MarketWatch. “But because this is an exceptional case, they may deviate from prior practice and issue it this month.”
• The BBDXY Average True Range for the last 10 Trading days: 359 Points

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The NZ government faces deeper budget deficits and a slower path back to surplus as the economic recovery lags. 

• Treasury’s half-year fiscal and economic update projects the operating balance will return to surplus in the year ending June 2030, a year later than the May Budget, which expected a surplus in 2029. Finance Minister Nicola Willis, however, is targeting a return to surplus in 2029, having previously aimed for 2028.
• The update projects a 2025-26 deficit of NZ$13.9bn (up from NZ$12.1bn in May), with deficits gradually declining to NZ$945mn in 2028-29 before reaching a NZ$2.3bn surplus in 2029-30. Net core Crown debt is expected to peak at 46.9% of GDP in 2027-28.
• New Zealand Debt Management has revised the government bond program, with planned issuance of NZ$35bn in 2025-26, down NZ$3bn from the Budget, and NZ$34bn in 2026-27, down NZ$2bn, before rising in later years.
• NZGB yields have declined by 4-11bps, led by the 5-10-year bucket, with the NZ-US and NZ-AU 10-year yield differentials 7-9bps lower.
• After rising 75bps from its October low, the 5-year yield has declined ~20bps from yesterday's peak.

Bloomberg Finance LP

The overnight range was 102.89 - 103.24, Asia is currently trading around 102.75, -0.25%. The pair has broken below the 102.90-103.00 support this morning as risk starts the Asian session under pressure. The fact that risk has not been able to turn around its poor close to last week could be signaling this pullback has more to go. On the day the break below the 102.90-103.00 area if sustained implies there could be a deeper pullback towards the 102.00 support area. There is a lot of event risk coming up with the market waiting for the delayed US data. So it's tough to visualise any big breaks or extensions until the market has had time to look at what tonight's data implies for risk.

• The AUD/JPY Average True Range(ATR) for the last 10 Trading days: 76 Points

Fig 1: AUD/JPY spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P