JGBS: Cheaper After Better Than Expected
JGB futures are weaker and at session lows, -15 compared to settlement levels.
- Japan's Q2 GDP was better than market expectations. Q/Q growth rose 0.3%, against a 0.1% forecast, while the Q1 outcome was revised up a touch to 0.1% from the original flat estimate. In terms of the detail, private consumption rose 0.2% q/q, versus 0.1% forecast, while Q1 was revised up to 0.2% (originally reported as 0.1%). Capex was up 1.3%, versus 0.7% expected (Q1 was revised down 0.1% to a 1.0% gain). Net exports contributed 0.3% to growth (0.1% was forecast), while inventories took 0.3% off growth, in line with forecasts. Nominal GDP rose 1.3%q/q, a touch below market forecasts of 1.4%.
- "JAPAN FINMIN KATO: MUST CLOSELY WATCH ECONOMIC, PRICE BACKDROP BEHIND RECENT COMMENTS BY BUSINESS SECTOR CALLING ON BOJ TO RAISE RATES, THOUGH SPECIFIC MONETARY POLICY DECISION UP TO BOJ - [RTRS]"
- Cash JGBs are 1-3bps cheaper across benchmarks. The benchmark 10-year yield is 2.7bps higher at 1.573% versus the cycle high of 1.616%.
- Swap rates are ~1bp higher, with swap spreads tighter.
- On Monday, the local calendar will see the Tertiary Industry Index.
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EURUSD TECHS: Corrective Cycle Extends
- RES 4: 1.1949 2.0% 10-dma envelope
- RES 3: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1851 High Sep 10 2021
- RES 1: 1.1750/1829 High Jul 10 / 01 and the bull trigger
- PRICE: 1.1618 @ 06:07 BST Jul 16
- SUP 1: 1.1593 Low Jul 15
- SUP 2: 1.1575 Low Jul 24
- SUP 3: 1.1505-day EMA
- SUP 4: 1.1446 Low Jun 19
A corrective cycle in EURUSD remains in play and the pair traded lower Tuesday. Support at the 20-day EMA, at 1.1655, has been cleared. This shifts the focus to the 50-day EMA, at 1.1505. A clear break of the average is required to highlight a stronger reversal. For now, the move down appears corrective and trend signals continue to highlight a dominant uptrend. A resumption of gains would open 1.1829, the Jul 1 high and a bull trigger.
AUSSIE BONDS: Modestly Cheaper, June Jobs Data Tomorrow
ACGBs (YM -3.0 & XM -3.0) are cheaper with narrow ranges.
- Cash US tsys are flat to 1bp richer, with a flattening bias, in today's Asia-Pac session after yesterday's post-CPI sell-off.
- Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at -7bps. At -7bps the differential is positioned near the middle of the +/- 30bps range that has held since November 2022.
- The bills strip cheaper with pricing -3 to -4 beyond the first contract (-1).
- RBA-dated OIS pricing is firmer across meetings today and remains 17–21bps above levels seen prior to the 8 July RBA decision. A 25bp rate cut in August is given an 88% probability, with a cumulative 54bps of easing priced by year-end.
- Tomorrow, the local calendar will see June Employment and Consumer Inflation Expectation data.
- (Bloomberg Economics) -- Australia’s labour market report for June is likely to show a lift in jobs and a slight increase in the unemployment rate. We expect a 20k increase in jobs, after a weaker-than-expected 2.5k decline in May.
- The AOFM plans to sell A$1100mn of the 1.00% 21 November 2031 bond on Friday.
BUND TECHS: (U5) Bear Cycle Remains Intact
- RES 4: 131.95 High Jun 13 and the bull trigger
- RES 3: 131.33 High Jun 20
- RES 2: 130.76 High Jul 4
- RES 1: 130.01/130.28 20- and 50-day EMA values
- PRICE: 129.48 @ 05:44 BST Jul 16
- SUP 1: 129.08 Low Jul 14
- SUP 2: 128.97 Low May 14 and a reversal trigger
- SUP 3: 128.90 Low Apr 10
- SUP 4: 128.40 Low Apr 9
Bund futures have recovered from their latest lows, however, a bear cycle remains intact. Recent weakness resulted in a break of 129.30, the May 22 low. The breach strengthens the current bearish theme and exposes the next key support at 128.97, the May 14 low and a bear trigger. On the upside, resistance around the the 50-day EMA, at 130.28, marks the key short-term hurdle. A clear breach of it is required to highlight a possible reversal.
