JGBS: 40Y Leads Market Cheaper After Poor Auction
JGB futures are sharply lower, -79 compared to settlement levels, but off the session’s worst levels.
- Today's focus has been on the US-JN trade deal. Japan will pay a 15% reciprocal tariff to the US, which is lower than the 25% rate that had been threatened.
- Kelly Eckhold (Westpac) on LinkedIn: "Trump trade deals progressing. Japan interestingly opens up the rice market in exchange for their tariff being reduced to 15%. That's a huge change for Japan, where rice imports have not been allowed."
- Cash US tsys are 1-2bps cheaper in today's Asia-Pac session after yesterday's modest rally.
- Cash JGBs are 4-8bps cheaper across benchmarks, with the benchmark 40-year yield underperforming after today's supply.
- Demand for today’s 40-year bond issuance was weak, with the high yield clearing well above dealer expectations. According to a Bloomberg survey, the market anticipated a yield of 3.35%, while the actual result came in at 3.375%. The auction’s cover ratio also declined to 2.1273x from 2.2114x at the previous issuance.
- Swap rates are 4-7bps higher, led by the belly of the curve. Swap spreads are mostly wider.
- Tomorrow, the local calendar will see S&P Global PMIs (P).
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EURUSD TECHS: Trend Needle Points North
- RES 4: 1.1783 1.764 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1696 1.618 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1685 76.4% retracement of the Jan ‘21 - Sep ‘22 downleg
- RES 1: 1.1544/1631 High Jun 20 / 12 and the bull trigger
- PRICE: 1.1491 @ 06:00 BST Jun 23
- SUP 1: 1.1444 20-day EMA
- SUP 2: 1.1310/1.1210 50-day EMA and a pivot level / Low May 29
- SUP 3: 1.1131 Low May 16
- SUP 4: 1.1065 Low May 12 and a reversal trigger
The trend set-up in EURUSD is unchanged and remains bullish. Recent weakness still appears corrective. The climb on Jun 12 resulted in a breach of 1.1573, the Apr 21 high. This strengthens the bullish theme and confirms a resumption of this year's uptrend. Scope is seen for a climb towards 1.1696, a Fibonacci projection. Initial firm support to watch lies at 1.1444, the 20-day EMA. The 50-day EMA lies at 1.1310.
BUND TECHS: (U5) Support Intact For Now
- RES 4: 132.42 2.000 proj of the May 14 - 20 - 22 price swing
- RES 3: 132.00 Round number resistance
- RES 2: 131.95 High Jun 13 and the bull trigger
- RES 1: 131.27 61.8% retracement of the Jun 13 - 16 downleg
- PRICE: 130.76 @ 05:38 BST Jun 23
- SUP 1: 130.17 Low Jun 16
- SUP 2: 130.12 Low Jun 5 a key short-term support
- SUP 3: 129.30 Low May 22
- SUP 4: 128.97 Low May 14 and a reversal trigger
Bund futures remain in consolidation mode and continue to trade below the Jun 13 high. For now, the latest move down appears to be a correction. Key short-term support to watch lies at 130.12, the Jun 5 low. A break of this level would highlight a stronger reversal and undermine the bullish theme. This would open 129.30, the May 22 low. Key short-term resistance and the bull trigger, has been defined at 131.95, the Jun 13 high.
