JGBS: Bull-Flattener As 20Y Extends Post-Supply Rally
In Tokyo morning trade, JGB futures are stronger, +5 compared to settlement levels, after reversing overnight weakness.
- Bloomberg’s latest economist survey (57 respondents, Dec. 8–11) projects Japan’s economy to grow 1.2% in 2025, 0.7% in 2026 and 0.8% in 2027, assigns a 25% chance of recession over the next year, shows Q4 2025 and Q1 2026 GDP forecasts edging up to 0.9% and 1.1% SAAR respectively, keeps the 2025 CPI outlook at 3.1% and nudges the 2026 CPI forecast to 1.9%, and sees the BOJ’s policy rate rising from 0.50% to 0.75% by end-2025.
- The local calendar will see October IP and Capu data later.
- Cash US tsys are flat to 1bp richer, with a slight steepening bias, in today's Asia-Pac session.
- Cash JGBs have bull-flattened across the curve, with yields flat to 3.25bps lower. The 20-year benchmark is down 2.1bps at 2.897%, extending its post-supply rally and pulling back from the recent cycle high of 2.97%.
- Swap rates are flat to 1bp lower.
Source: Bloomberg Finance LP
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CHINA SETS YUAN CENTRAL PARITY AT 7.0833 WEDS VS 7.0866
- CHINA SETS YUAN CENTRAL PARITY AT 7.0833 WEDS VS 7.0866
US TSYS: Yields Gap Lower at Open of Cash Trading
- Treasuries were closed overnight in the US for Veterans day and with no lead in for futures, the open was slow. However once cash opened, a strong rally ensued with yields 3-4.5bps lower across the curve, with the 7-Yr the outperformer, down -4.4bps in early trade.
- The rally is after employment figures from ADP Research signaled US companies shed 11,250 jobs per week on average in the four weeks ended Oct. 25, spurring the idea of a December cut being back on.
- Futures are modestly down with the US 10-yr down -03 to 112-30+, atop the 20-day EMA. If it trends below, the 50-day EMA below is at 112-26+.
- The 2-Yr is at 3.56% (-3.3bps)
- The 5-Yr is at 3.672% (-4.3bps)
- The 10-yr is at 4.081% (-3.7bps)
- The 30-Yr is at 4.679% (-2.7bps)
Next up tonight is the US$42bn 10-Yr issuance as the next guide for market demand, with markets remaining fixated on the US shutdown outcome.
JPY: CNH/JPY - Dips Remain Supported, Testing 21.70 Resistance
The overnight range was 21.5902 - 21.6816, Asia is currently trading around 21.6600. The pair continues to find demand on dips and while the 21.30-21.40 support area holds I suspect this will carry on. With risk building on its recent gains and Japanese Policy keeping the JPY under pressure it is looking to test the 21.70/75 resistance area. A break above here would turn the focus back toward the highs of 2024 seen around the 22.20 area.
Fig 1 : CNH/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
