JGBS: Bonds Unwind Initial Post-BoJ Cheapening, Lab Mkt Data Tomorrow
JGB futures are little changed, -2 compared to settlement levels, after reversing initial weakness seen after the release of the BoJ Policy Decision.
- The BoJ held rates steady at 0.50%, as widely expected. The decision by the board was also unanimous. The central bank nudged down the degree of uncertainty surrounding the outlook. It noted: "it remains highly uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and
prices will react to them." In the previous statement, these uncertainties were judged 'extremely' high. - On balance, the statement brings us marginally closer to a further rate hike, given the central bank's degree of uncertainty was slightly softened. Still, the BoJ seems unlikely to act in the near term (the next policy meeting is on Sep 19, followed by Oct 30). It has time to assess key macro trends and obtain greater clarity around the outlook (i.e. move away from high uncertainty around the trade/external outlook).
- Cash JGBs are little changed across benchmarks out to the 20-year and 1-2bps cheaper beyond. The benchmark 10-year yield is 0.1bp higher at 1.562% versus the cycle high of 1.616%.
- Swap rates are flat to 1bp lower.
- Tomorrow, the local calendar will see Jobless Rate and Job-To-Applicant Ratio data.
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EURUSD TECHS: Northbound
- RES 4: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1851 High Sep 10 2021
- RES 2: 1.1821 High Sep 16 2021
- RES 1: 1.1807 Intraday high
- PRICE: 1.1786 @ 06:09 BST Jul 1
- SUP 1: 1.1631 High Jun 12 and a recent breakout level
- SUP 2: 1.1554 20-day EMA
- SUP 3: 1.1446 Low Jun 19
- SUP 4: 1.1389 50-day EMA
The trend set-up in EURUSD remains bullish and the pair continues to appreciate. Last week’s gains resulted in a breach of resistance and a bull trigger at 1.1631, the Jun 12 high. This confirms a resumption of the trend. The 1.1800 handle has been pierced, sights are on 1.1821, the Sep 16 2021 high. Key short-term support to watch lies at 1.1554, the 20-day EMA. A clear break of this average is required to signal scope for a deeper retracement.
AUSSIE BONDS: Richer On A Data-Light Session, US JOLTS & ISM Manf Data Due Today
ACGBs (YM +3.0 & XM +5.0) are trading moderately stronger on another relatively subdued data-light Sydney session.
- Cash US tsys are 1-2bps richer, with a flattening bias, in today's Asia-Pac session, extending yesterday's bull-flattener. Today’s US calendar: S&P Global US Man PMI, Wards Total Vehicle Sales, ISM Manufacturing, Construction Spending, JOLTS, Dallas Fed Services Activity.
- Top U.S. trade officials are now seeking narrower agreements with other countries to secure deals before President Donald Trump's July 9 tariff deadline, the Financial Times reported on Tuesday, citing people familiar with the talks.
- The cash 10-year is 5bps richer, with the AU-US 10-year yield differential at -9bps.
- The bills strip is slightly mixed, with flat to +3.
- RBA-dated OIS pricing is flat to modestly softer across meetings today. A 25bp rate cut in July is given a 95% probability, with a cumulative 83bps of easing priced by year-end (based on an effective cash rate of 3.84%).
- Tomorrow, the local calendar will see Building Approvals and Retail Sales data.
- This week, the AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond tomorrow and A$1000mn of the 2.25% 21 May 2028 bond on Friday.
ASIA STOCKS: Major Bourses Mixed on Slow Start to the Month
The KOSPI lead the way for the region's major bourses as hopes remain high that the new government will deliver on the long held plans to revise the commercial act. The Shenzhen Exchange has issued new rules to simplify the process for tech funds listed on the the ChiNext to raise funds. The Philippines has cut the transaction costs for stock trading in a move seen to improve liquidity on the PSEi.
- China's major bourses were mixed today with the Hang Seng lower by -0.85% whilst the CSI 300 was up +0.05%, Shanghai Comp +0.20% and Shenzhen fell by -0.95%
- The KOSPI was one of the best regional performers rising +1.08%.
- The FTSE Malay KLCI did very little, up just +0.04%
- The Jakarta Composite fell -0.27%
- The NIFTY 50 is up just +0.10% in a bid to recover from yesterday's fall of -0.47%
