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.
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AUSSIE BONDS: Cheaper Ahead Of RBA Policy Decision Tomorrow
ACGBs (YM -4.0 & XM -6.0) are cheaper on a data-light Sydney session.
- Cash US tsys have twist-steepened in today's Asia-Pac session, with yields 1bp lower to 4bps higher, as the market continued to digest late Friday news that Moody's Ratings downgraded the US credit score.
- (Bloomberg) -- “Goldman Sachs interest-rate strategists raise their year-end Treasury yield forecasts following a larger-than-expected reduction in US-China tariffs.”
- “US House panel approves Trump tax cut bill, setting up a possible vote on passage this week” - [RTRS]
- Cash ACGBs are 4-6bps cheaper with the AU-US 10-year yield differential at flat.
- The bills strip has bear-steepened, with pricing -2 to -6.
- Tomorrow, the local calendar will see the RBA Policy Decision, with the market expecting a 25bp cut to 3.85%.
- RBA-dated OIS pricing is flat to 4bps firmer across meetings today. A 25bp rate cut in May is given a 95% probability, with a cumulative 75bps of easing priced by year-end. Notably, today’s moves leave meetings pricing 4-44bps firmer than levels before the release of Q1 CPI data on April 30.
- The AOFM plans to sell A$1200mn of the 4.25% 21 December 2035 bond on Wednesday and A$800mn of the 2.75% 21 November 2028 bond on Friday.
ASIA STOCKS: Major Bourses Down on US Downgrade
Major bourses across the region despite China's industrial production in April beating expectations. Across the region the key focus was not earnings or regional economic data but the Moody's downgrade of the US and news that the US consumer continues to be very pessimistic.
Alibaba shares drop as much as 4.8% in Hong Kong following a New York Times report that the Trump administration has raised concerns over Apple’s potential deal with the Chinese tech giant as Hong Kong prepares for teh trading of CATL trading debut, following its price at what was considered the top end of its range.
- Major bourses are lower in China with the Hang Seng down -0.50%, CSI 300 -0.38% Shanghai Comp -0.10% and Shenzhen down -0.10%.
- The TAIEX in Taiwan is down -1.25%
- The KOSPI has had its worst fall since the middle of April, down -1.20%.
- The FTSE Bursa Malaysia KLCI had its biggest drop since early April, down -1.03%
- The Jakarta Composite is one of the few risers today, up +0.25% to continue its recent good run.
- Singapore's FTSE Straits Times is down -0.17% and the PSEi in the Philippines is down -0.15%.
- India's NIFTY 50 is holding onto very modest gains in the morning session, up just +0.08% following last weeks gains in excess of 4%
EURUSD TECHS: Support Still Intact
- 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: 1.1440/1573 High Apr 23 / 21 and the bull trigger
- RES 1: 1.1266/1381 High May 14 / High May 2 - 6
- PRICE: 1.1182 @ 05:58 BST May 17
- SUP 1: 1.1096/65 50-day EMA and a pivot level / Low May 12
- SUP 2: 1.1026 38.2% retracement of the Feb 3 - Apr 21 bull cycle
- SUP 3: 1.0943 Low Apr 10
- SUP 4: 1.0857 50.0% retracement of the Feb 3 - Apr 21 bull cycle
EURUSD is unchanged and continues to trade above last week’s low. Recent weakness appears corrective and key trend signals highlight an uptrend. Note that a key support at the 50-day EMA, at 1.1096, remains intact. A clean break of this average would undermine the uptrend. A key resistance to watch is 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction and highlight a bullish break.
