JGBS: Cash Curve Flatter, BoJ Seen On Hold, Focus on Dec/Jan Hike Risks
JGB futures are holding weaker, last 136.12, -.10 versus settlement levels. Some negative spillover has been likely today from the lunge in Aussie bond futures (post the CPI beat), while US futures have been quite steady ahead of the Fed later. For JGBs, we haven't been able to test under 136.00 at this stage, while important resistance is still some distance away on the upside.
- We also saw some modest downside pressure following earlier US Tsy Secretary remarks. Via X he said: "The Government’s willingness to allow the Bank of Japan policy space will be key to anchoring inflation expectations and avoiding excess exchange rate volatility."
- This comes ahead of tomorrow's policy meeting outcome, where little hike risks are seen by the economic consensus or market pricing. Focus will be on Dec/Jan hike risks and whether we see further dissenters who are in favour of a rate hike. We had 2 at the Sep board meeting, a shift to 3 would likely raise Dec hike risks.
- In the cash JGB space, the bias remains for flatter curves, the 2/30s down to +211bps. The 30-yr JGB yield looking to close under its 100-day EMA support (around 3.07% and we currently trade at 3.05%). The 10yr yield is relatively steady at 1.65%.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURUSD TECHS: Monitoring Support Around The 50- Day EMA
- RES 4: 1.2063 2.236 proj of the Feb 28 - Mar 18 - 247 price swing
- RES 3: 1.2000 Round number resistance
- RES 2: 1.1919/23 High Sep 17 / 2.0 proj of Feb 28 - Mar 18-27 swing
- RES 1: 1.1754/1820 High Sep 25 / 23
- PRICE: 1.1731 @ 06:04 BST Sep 29
- SUP 1: 1.1646 Low Sep 25
- SUP 2: 1.1574 Low Aug 27
- SUP 3: 1.1528 Low Aug 5
- SUP 4: 1.1392 Low Aug 1 and bear trigger.
The trend theme in EURUSD is unchanged, it remains bullish and recent weakness is considered corrective. However, support at 1.1681. the 50-day EMA, has been breached. A clear break of this average would signal scope for a deeper retracement and expose 1.1574 initially, the Aug 27 low. For bulls, a resumption of gains would refocus attention on 1.1923, a Fibonacci projection. Initial firm resistance to watch is 1.1820, the Sep 23 high.
AUSTRALIA: Decent Rally Ahead of RBA
- ACGBs have staged a decent rally today ahead of tomorrow's RBA decision and on headlines that the budget deficit has narrowed.
- Market consensus remains for no change from all of the estimates on BBG currently, with rates set to remain at 3.60%.
- A rally across the yield curve sees lower yields by 3.5-4.5bps with the 10-Yr and 15-Yr the best performers.
- Australia's 10-Yr bond future is up +0.04 to 95.61, below all major moving averages with the 20-day EMA at 95.66.
- The 3-Yr bond future is up +0.04 at 96.42 and is also below all major moving averages.
- This week sees Australia sell A$1.2bn of 2034 bonds on Oct 1, A$1bn 133-day bills and A$1bn 70-day bills on October 2 and A$1bn of 2032 bills on October 3rd.
- There remains only 6bps of cuts priced in over the next month with 16bps over the next three.
BUND TECHS: (Z5) Key Support Remains Exposed
- RES 4: 129.50 High Aug 5
- RES 3: 129.44 High Sep 10 and key short-term resistance
- RES 2: 129.13 High Sep 17
- RES 1: 128.45 20-day EMA
- PRICE: 128.32 @ 05:38 BST Sep 29
- SUP 1: 127.88 Low Sep 25
- SUP 2: 127.61 Low Sep 3 and the bear trigger
- SUP 3: 127.46 1.00 proj of the Aug 14 - 15 - 28 price swing
- SUP 4: 127.13 1.236 proj of the Aug 14 - 15 - 28 price swing
Bund futures are in consolidation mode and are trading closer to their recent lows. Key support and the bear trigger remains exposed, it lies at 127.61, the Sep 3 low. Clearance of this level would cancel a recent bullish theme and confirm a continuation of the medium-term bear cycle. For bulls, a reversal higher would refocus attention on key resistance at 129.44, the Sep 10 high. First resistance is at 128.45, the 20-day EMA.
