JGBS: Bull-Flattener Ahead Of Upper House Elections
JGB futures are stronger and at Tokyo session highs, +25 compared to settlement levels.
- (Bloomberg) - "BOJ's Eye Will Be on Heat Hidden in Cooler CPI. Japan's June CPI report reveals mixed inflation dynamics, with softer energy costs tempering headline and core price gains. Firms continued to pass on higher costs of labour as well as rice to consumers in a variety of areas, nudging up the gauge that excludes fresh food and energy. The Bank of Japan will focus on the underlying strength, a sign the wage-price cycle is gaining traction and moving inflation closer to its 2% target."
- (Bloomberg) - "Polls for Japan's July 20 upper house election suggest Prime Minister Shigeru Ishiba's Liberal Democratic Party and its coalition partner Komeito risk losing their majority in the chamber. That outcome would leave Ishiba heading a weakened coalition - unable to drive key legislation or, in the worst case, stepping down as leader."
- Cash US tsys are ~1bp richer in today's Asia-Pac session.
- Cash JGBs are 2-5bps richer across benchmarks, with a flatter curve. The benchmark 10-year yield is 3.4bps lower at 1.534% versus the cycle high of 1.60%.
- Swap rates are 1-7bps lower, with longer-dated swap spreads tighter.
- On Monday, the local calendar will be out for the Marine Day holiday.
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EURUSD TECHS: Bullish Conditions Remain Intact
- RES 4: 1.1783 1.764 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1696 1.618 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1685 76.4% retracement of the Jan ‘21 - Sep ‘22 downleg
- RES 1: 1.1631 High Jun 12
- PRICE: 1.1504 @ 06:06 BST Jun 18
- SUP 1: 1.1425 20-day EMA
- SUP 2: 1.1286/1.1210 50-day EMA and a pivot level / Low May 29
- SUP 3: 1.1131 Low May 16
- SUP 4: 1.1065 Low May 12 and a reversal trigger
The trend set-up in EURUSD remains bullish and short-term weakness is for now considered corrective. Recent gains have resulted in a breach of 1.1573, the Apr 21 high. This strengthens the bullish theme and confirms a resumption of this year's uptrend. Scope is seen for a climb towards 1.1696, a Fibonacci projection. Initial firm support is at 1.1425, the 20-day EMA. The 50-day EMA lies at 1.1286. Short-term weakness is considered corrective.
JGBS: Cash Bonds Mixed Ahead Of FOMC, Twist-Steepener
JGB futures are holding stronger, +24 compared to settlement levels, but sitting near the middle of today’s range.
- The primary focus of the BoJ decision was the pace of quantitative tightening (QT) beyond the near term. From the second quarter of 2026 through the first quarter of 2027, it will slow that pace to ¥200 billion per quarter. Overall, the BoJ signalled a gradual, data-dependent approach to policy normalisation, balancing market stability, inflation developments, and global uncertainties as it proceeds with cautious tapering into 2026 and beyond. (See MNI BoJ Review here)
- Japanese politician Shigeru Ishiba said he had frank discussions with former U.S. President Donald Trump on tariffs and aims to work toward a mutually beneficial trade deal. He emphasised that tariffs, particularly on autos, would significantly impact companies and stressed that Japan must not compromise its national interests to secure a deal. (BBG)
- The cash JGB curve has twist-steepened, with yields 2bps lower to 1bp higher. The benchmark 10-year yield is 0.3bps lower at 1.462%.
- The swaps curve has bear-steepened, with rates flat to 3bps higher.
- Tomorrow, the local calendar will see Weekly International Investment Flow and Tokyo Condominiums for Sale data alongside 5-year supply.
BUND TECHS: (U5) Trading Below Last Week’s High
- RES 4: 132.42 2.000 proj of the May 14 - 20 - 22 price swing
- RES 3: 132.00 Round number resistance
- RES 2: 131.85/95 High Apr 22 and the bull trigger / High Jun 13
- RES 1: 131.27 61.8% retracement of the Jun 13 - 16 downleg
- PRICE: 130.77 @ 05:45 BST Jun 18
- SUP 1: 130.17 Low Jun 16
- SUP 2: 130.12 Low Jun 5 a key short-term support
- SUP 3: 129.30 Low May 22
- SUP 4: 128.97 Low May 14 and a reversal trigger
Bund futures are unchanged and the contract continues to trade below last Friday’s high. For now, the latest move down is considered corrective and key short-term support to watch lies at 130.12, the Jun 5 low. A break of this level would highlight a stronger reversal and undermine the bullish theme. Key short-term resistance and the bull trigger, has been defined at 131.95, the Jun 13 high.
