JGBS: Bull-Flattener After 30Y Supply, BoJ SoS Tomorrow
Aug-07 04:53
JGB futures are stronger, +13 compared to settlement levels.
- Today, the local calendar will also see Leading/Coincident Index data.
- Zerohedge on X: "What epic chaos, Japan had expected items currently tariffed at < 15% would face a 15% levy, while those above 15%, like beef, would stay at the current rate without any additional tariff. But according to the US government, imports from Japan will be subject to an additional 15% tariff regardless of the existing rate: Kyodo."
- Cash US tsys are 1bp cheaper to 1bp richer, with a slight steepening bias, in today's Asia-Pac session.
- Cash JGBs are flat to 4bps across benchmarks, with a flatter curve after today’s 30-year auction.
- The 30-year JGB auction delivered mixed results. The low price aligned with dealer expectations of 95.35, per the Bloomberg survey. However, the cover ratio dipped to 3.4297x from 3.5796x. On the other hand, the auction tail shortened significantly to 0.15 from 0.31, indicating an improvement in bidding strength.
- Swap rates have twist-steepened, with rates 1bp lower to 2bps higher. Swap spreads are mixed.
- Tomorrow, the local calendar will see Household Spending, Trade Balance and Bank Lending data alongside the BOJ Summary of Opinions (July MPM).
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BONDS: NZGBS: Closed Modestly Cheaper Ahead Of RBNZ Decision Tomorrow
Jul-08 04:51
NZGBs closed modestly cheaper, with benchmark yields 2-3bps higher.
- The NZ-US and NZ-AU 10-year yield differentials closed slightly tighter. It is noteworthy, however, that the local market was closed at the time of the RBA decision. Tomorrow’s open is likely to reflect both post-RBA decision trading as well as any overnight fluctuations in US tsys.
- Swap rates closed 1-3bps higher, with the 2s10s curve steeper.
- Tomorrow, the local market will see the RBNZ Policy Decision. The sell-side consensus is for the RBNZ to remain on hold tomorrow, which is also consistent with market pricing.
- There are some sell-side forecasters looking for a rate cut tomorrow, whilst most of those who see the RBNZ on hold, see risks of further cuts as we progress through 2025. For this meeting, our own bias is for the central bank to hold policy rates steady. Recent inflation outcomes arguably provide the strongest signal that the RBNZ should hold pat at tomorrow's policy meeting. (See MNI RBNZ Preview here)
- RBNZ dated OIS pricing closed little changed across meetings. 3bps of easing is priced for this week's meeting, with a cumulative 30bps by November 2025.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond and NZ$200mn of the 4.50% May-35 bond.
AUSSIE BONDS: Cheaper After RBA Surprise Market With No Cut
Jul-08 04:48
ACGBs (YM -12.0 & XM -8.0) are 3-6bps cheaper after the RBA surprised the market by leaving the cash rate at 3.85%. A 25bp rate cut today was given a 92% probability ahead of the decision by the market.
- The RBA Board sees inflation risks as more balanced and the labour market as strong, but remains cautious due to uncertainty in demand and supply. It will await more data to confirm inflation is tracking toward 2.5%.
- Policy remains flexible to global developments. A 6–3 majority supported today’s decision, and future statements will include an unattributed record of votes. The Board remains focused on price stability and full employment.
- Cash ACGBs are 6-8bps cheaper after the decision with the AU-US 10-year yield differential at -11bps.
- The bills strip has shunted cheaper, with pricing -5 to -12 after the decison.
- RBA-dated OIS pricing is 11-23bps firmer across meetings after the decision. A cumulative 64bps of easing priced by year-end versus 75bps pre-RBA
- Tomorrow, the local calendar will see a speech by RBA Hauser.
- The AOFM plans to sell A$1200mn of the 4.25% 21 December 2035 bond tomorrow and A$1000mn of the 2.75% 21 November 2029 bond on Friday.
AUD: RBA Reaction
Jul-08 04:35
The RBA has left rates unchanged in a surprise decision. The AUD went into the Meeting trading around 0.6510 and quickly moved to 0.6550 on this as the market was almost fully priced for a cut.*RBA: JUDGED RISKS TO INFLATION HAVE BECOME ‘MORE BALANCED’ - BBG
- AUD/USD - 0.6545, +0.83%
- AUD/NZD - 1.0862, +0.32%
- EUR/AUD - 1.7950, +0.50%
- AUD/JPY - 95.50, +0.75%
- XPU5 - 8550, -0.26%
- EOY OIS 1-10bps higher, bear steepener yields 1-5bps higher
