JGBS: Cash Bonds Little Changed, 5Y Supply Tomorrow, Q1 GDP On Friday
JGB futures are stronger, +7 compared to the settlement levels, after dealing in a relatively narrow range in today’s Tokyo session.
- There has been no net movement in cash US tsys in today's Asia-Pac session after being little changed yesterday following the release of April CPI data.
- Cash JGB movements are bounded by +/- 1bp out to the 30-year and 3bps richer beyond.
- “Japanese 30-year yields avoided climbing above 3% this week after a solid auction, but that looks like a temporary reprieve as rising German yields are likely to drag JGBs in the same direction. Indeed, bunds appear to be heading back toward the levels seen in March, even though the European Central Bank is forecast to lower interest rates again this year. Similar to Japan, the background is increased spending, especially on defence which will add to upward pressure on long-term rates.” (per BBG)
- The benchmark 10-year yield is 0.7bps higher at 1.451% versus the cycle high of 1.596%.
- Swap rates are 1bp lower to 2bp higher, with a steepening bias. Swap spreads are mixed.
- Tomorrow, the local calendar will see International Investment Flow and Machine Tool Orders data alongside 5-year supply. Q1 GDP (P) is due on Friday.
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ASIA STOCKS: A Better Day on Tariff Pause Headlines.
Asia’s major bourses had a better day after President Trump paused import duties on consumer electronics giving a boost to investor sentiment across the region. Whilst the pause is temporary, it gives markets time to pause and focus on other areas in the global economy where risks are rising.
- In China the Hang Seng led the way today rising +2.4%, with the CSI 300 up +0.47%, Shanghai up +0.86% and Shenzhen up +1.5%.
- The Kospi had a solid day rising +0.91% in a week where the Central Bank meets.
- In Malaysia, the FTSE Malay KLCI is up +1.4% in a week where 1Q GDP is released.
- For Indonesia, the Jakarta Composite is putting in another day of solid gains rising +2.00% following stronger than expected FX Reserve data.
- In Singapore, the MAS eased policy and pointed to lower growth whilst the FTSE Straits Times rose +1.46%.
- India’s NIFTY 50 is very strong this morning, rising +1.9% ahead of this week’s CPI release where it is expected that inflation will continue to moderate.
BUND TECHS: (M5) Trend Structure Still Bullish
- RES 4: 133.00 round number resistance
- RES 3: 132.56 High Feb 28 and a key resistance
- RES 2: 132.03 High Apr 7 and the bull trigger
- RES 1: 131.42 High Apr 11
- PRICE: 130.63 @ 05:44 BST Apr 14
- SUP 1: 129.59/128.60 20-day EMA / Low Apr 9
- SUP 2: 128.47 Low Mar 28
- SUP 3: 127.74 Low Mar 25 and a key short-term support
- SUP 4: 127.20 Low Mar 17
Bund futures traded in a volatile manner last week and for now, remain below their recent highs. A bull cycle is in play and the latest pullback is considered corrective. A fresh short-term cycle high on Apr 7 reinforces a bullish theme. The contract has recently cleared 131.14, 76.4% of the Feb 28 - Mar 11 bear leg. This opens 132.56 next, the Feb 28 high. Initial firm support lies at 128.60, the Apr 9 low.
FOREX: USD Bear Cycle Continues
Broad USD weakness over the course of last week as a rotation out of US assets seems to be gathering momentum. The BBDXY is down -0.18% in Asia today. The European Union is racing to clinch trade deals with countries around the globe in an effort to diversify away from an increasingly protectionist US.
- EUR/USD - Asian range 1.1318 - 1.1409, dipped initially on the early Monday open but has since traded bid to go into the London open around 1.1375. EUR/USD had been trading very closely with the 10 year rate differential, this relationship broke down completely last week. The market will be watching to see if this continues this week.
- GBP/USD - Asian range 1.3064 - 1.3128, trading just off the day's highs going into the London session.
- USD/CNH - Asian range 7.2786 - 7.3173, the USD/CNY fix was another higher one at 7.2110, this has seen USD/CNH bounce strongly from the 7.2800 area. USD/CNH goes into the London open near the session highs.
- USD/JPY - Asian range 142.25 - 144.06, was under pressure from the open once again. Falling back to last week's lows around 142.00 into the Japanese fix. It seems any paring back of positions done on Friday going into the weekend have quickly been re-established. Huge support level around 140, a break here could see the move accelerate.
- Cross asset : SP +1.02%, Gold 3230.00, US 10yr 4.46%, BBDXY 1232, Crude oil 61.20.
