JGBS: Aggressive Bear-Steepener After Poor 40Y Auction

ACGBs (YM +3.0 & XM +5.0) are richer and near Sydney session highs on a data-light day.

• Cash US tsys are slightly mixed, with a flattening bias, in today's Asia-Pac session after Friday's solid gains.
• The focus of the week locally will be on Wednesday’s Q1 CPI, which is forecast to show the RBA’s preferred trimmed mean falling below the top of the 2-3% target band for the first time since Q4 2021. This should signal another 25bp cut on May 20. Retail sales are on Friday, and the Federal Election Saturday.
• Cash ACGBs are 4-7bps richer with the AU-US 10-year yield differential at -8bps.
• Swap rates are 6-8bps lower, with the 3s10s curve flatter.
• The bills strip has bull-flattened, with pricing -2 to +4.
• RBA-dated OIS pricing is flat to 5bps softer across meetings today. A 50bp rate cut in May is given a 12% probability, with a cumulative 118bps of easing priced by year-end.
• Tomorrow, the local calendar will see a speech from RBA Kent, Assistant Governor (Financial Markets) on Australia’s External Position and the Evolution of the FX Markets.
• The AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Friday.

• RES 4: 133.90 1.236 proj of the Mar 25 - Apr 7- 9 price swing                 
• RES 3: 133.00 round number resistance      
• RES 2: 132.56 High Feb 28 and a key resistance
• RES 1: 132.03 High Apr 7 and the bull trigger                    
• PRICE: 131.67 @ 05:49 BST Apr 28
• SUP 1: 130.64/129.92 20-day EMA / Low Apr 11          
• SUP 2: 129.02 Low Apr 10            
• SUP 3: 128.60 Low Apr 9 and a key support   
• SUP 4: 128.47 Low Mar 28  

Bund futures are in consolidation mode and continue to trade just below their recent highs. A bull cycle remains in play and the pullback between Apr 7 - 9 is considered corrective. Attention is on resistance at 132.03, the Apr 7 high and a bull trigger. Clearance of this level would confirm a resumption of the uptrend and open 132.56, the Feb 28 high. Firm support lies at 128.60, the Apr 9 low. A break of this level would alter the picture.

The focus this week will be on major China bank earnings as investors see if tariffs are impacting companies yet as markets show signs that the tariff threats may not be the driving forces in the week ahead. With over 400 companies reporting this week, investors will be looking for firsthand evidence that the trade war is impacting profitability. 

As the press conference in China reiterated its commitment to jobs and support to the economy the government indicated that contingency plans are in place and that they remain 100% confident of achieving 5% economic growth. 

• China’s major bourses were mixed today with the Hang Seng barely gaining up +0.07% whilst the CSI 300 was flat.  Shanghai was down -0.03% and Shenzhen -0.72%.
• The KOSPI had a quiet start to the week in a week with significant data releases, rising just +0.16%.
• The FTSE Malay KLCI rose +0.65% to add to last week’s modest gains.
• The Jakarta Composite was up +0.72% today following on from last week's strong week where it gained +3.74%.
• In Singapore, the FTSE Straits Times was down -0.43% whilst the PSei in the Philippines rose +0.39%.
• India’s NIFTY 50 is up +0.90% in Monday’s trading, following on from last week’s poor end to the week with losses on Thursday and Friday