JGBS: Bull-Flattener After 20Y Auction, BoJ Regional Assessment Out

• RES 4: 119.790 High Apr 7 and the bull trigger
• RES 3: 118.600 High Apr 22           
• RES 2: 118.300 High May 7  
• RES 1: 118.280 High Jun 3 / 5   
• PRICE: 117.660 @ 05:33 BST Jun 10  
• SUP 1: 117.530 Low Jun 5 
• SUP 2: 117.470 Low May 21 and a key near-term support
• SUP 3: 117.470 Low May 21
• SUP 4: 116.660 Low Mar 27       

Bobl futures remain in a bull cycle. The sharp pullback last Thursday - for now - still appears corrective. The recovery since mid May highlights a reversal and the end of a correction in April and May. A resumption of gains would pave the way for a move towards 118.300, the May 7 high. Further out, scope would be for an extension towards 118.790, the Apr 7 high. Support to monitor is 117.470, the May 21 low. The bull trigger is 118.280, Jun 3 / 5 high.

JGB futures are weaker and at Tokyo session lows, -12 compared to settlement levels. 

• BoJ Governor Ueda has been before parliament, answering questions from lawmakers. The Governor noted limited policy space on the downside, given the current 0.50% policy rate. This is if fresh stimulus is needed. The real rate is being kept sub-0% to stimulate the economy further, as Ueda states that Japan is still some distance from the 2% inflation objective. Ueda reiterated that they will raise rates if they have confidence in achieving the 2% target.
• " Kato: Seeking more JGB holdings by domestic investors, will make efforts toward appropriate JGB management. Crucial to seek JGB holdings by diverse groups." – BBG
• The broader implications of greater domestic participation in JGBs may mean less outbound investment in overseas bonds (and potential equities). This could have implications for offshore debt markets.
• Cash US tsys are ~1bp cheaper in today's Asia-Pac session after yesterday's modest rally.
• Cash JGBs have twist-flattened across benchmarks, with the 7-year yield 2bps higher and the 30-year yield 1bp lower. The benchmark 10-year yield is 0.9bp higher at 1.477% versus the cycle high of 1.596%.
• Swap rates are flat to 5bps higher, with the curve steeper. Swap spreads are wider.
• Tomorrow, the local calendar will see PPI data. 

• RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
• RES 3: 1.1608 High Nov 9 2021
• RES 2: 1.1573 High Apr 21 and the bull trigger
• RES 1: 1.1495 High June 05
• PRICE: 1.1401 @ 06:04 BST Jun 10
• SUP 1: 1.1348 20-day EMA
• SUP 2: 1.1224/1.1065 50-day EMA and a pivot level / Low May 12
• SUP 3: 1.1026 38.2% retracement of the Feb 3 - Apr 21 bull cycle
• SUP 4: 1.0943 Low Apr 10

EURUSD is in consolidation mode but continues to hold on to the bulk of its recent gains. The breach of 1.1419, May 26 high, confirmed an extension of the current bull cycle and opens 1.1573, the Apr 21 high and bull trigger. MA studies are in a bull-mode position, highlighting a dominant uptrend. Support to watch lies at 1.1224, the 50-day EMA. A clear break of this average would undermine the bull theme. Initial support is 1.1348, the 20-day EMA.