USDJPY TECHS: Bear Trigger Remains Exposed

JGB futures are weaker, -10 compared to settlement levels, after gapping lower in early afternoon trade following today’s 10-year auction results.

• The 10-year JGB auction delivered very poor results, with the low price falling well short of Bloomberg dealer pol expectations. Moreover, the cover ratio declined to 2.6566x, the weakest since October 2021, from 3.1809x in the previous auction and the tail lengthened dramatically to 0.21 from 0.03.
• This performance came despite the auction offering an outright yield 10-15bps higher than last month. Improving sentiment toward global long-end bonds and slightly less aggressive expectations of further near-term tightening by the BoJ didn’t appear to support demand.
• Cash US tsys have reversed early strength to be little changed in today’s Asia-Pac session.
• Cash JGBs are slightly mixed, with yield swings bounded by +/-1bp. The benchmark 10-year yield is 1.1bps higher at 1.425% after today’s supply.
• Swap rates are flat to 2bps lower, with a flatter curve. Swap spreads are mostly tighter.
• Tomorrow, the local calendar will see Jibun Bank Composite & Services PMIs alongside BoJ Rinban Operations covering 1-5-year and 10-25-year JGBs. BoJ Deputy Governor Uchida will also give a speech in Shizuoka.

• Following last week’s profit taking, gold’s rally resumed overnight as the threat of tariffs hung over markets but traded side ways in Asian trading today. .
• As President Trump’s deadline for tariffs draws near, markets sentiment was very weak with the S&P down heavily and bond yields rallying as much as 6bps.
• No surprise in that environment that gold rallied, with bullion up +1.2% on the day.
• Gold it rose steadily all day to finish the US trading session on its highs of $2,892.79, where it oscillated around throughout the day, down marginally at $2,891.90
• US data releases didn’t help to improve investor sentiment with ISM Prices Paid higher than expected whilst ISM Manufacturing softened.
• The weaker than expected data release adds to speculation of potential interest rate cuts by the Federal Reserve which is an additional boost to gold.

Asian equities fell sharply as trade tensions escalate, doubling tariffs on Chinese imports to 20% and imposing 25% levies on Canada and Mexico. This sparked fears of a broader trade war, with Japan's Nikkei and Hong Kong’s Hang Seng leading declines. Indian equities extended their selloff, with the NSE Nifty 50 Index nearing a record 10-day losing streak as global funds continued to pull out. Auto and chip stocks were hit hardest, particularly in Japan and South Korea, while Chinese EV makers slumped following BYD’s large share placement. Investors are closely watching China’s National People’s Congress for potential stimulus measures and trade responses.

• Japan's Topix -1.05% and Nikkei -1.90% amid trade war concerns, with major auto stocks like Toyota, Honda, and Mazda falling. A stronger yen and exposure to Mexican tariffs also weighed on sentiment.
• China's CSI 300 -0.25% and Hong Kong's HSI is -0.45% as investors reacted to higher US tariffs. EV makers like BYD declined sharply after a large share placement, while robotics-related stocks gained on government support. UBS expects Chinese stocks to outperform in the long run due to resilient domestic flows.
• South Korea's Kospi is unchanged with Hyundai and HL Mando dropping due to auto tariff risks. Battery stocks like CATL and Eve Energy slumped ahead of a European policy announcement. Defense stocks gained on expectations of higher European military spending.
• Taiwan's TAIEX is 0.45% lower after TSMC slid 2.4% despite announcing a $100b US investment.
• Australia ASX200 is 0.65% lower while New Zealand's NZX 50 dropped 0.65%, tracking global weakness. Australia’s GDP data release is in focus.
• India's Nifty 50 down 0.30% neared a 10-day losing streak as global investors pulled nearly $14b this year, citing high valuations and slowing growth. Technical indicators suggest a possible rebound.
• Indonesia’s JCI tumbled 1.3%, Malaysia’s KLCI lost 0.8%, and Vietnam’s VN Index fell 0.8%, while Thailand and the Philippines saw slight gains.