JGBS: Cheaper Led By 7-10Y, 40YY Sets Record High
JGB futures are weaker, -36 compared to settlement levels, hovering near the middle of today’s range.
- Outside of the previously outlined household spending and labour earnings, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are ~1bp richer in today's Asia-Pac session after yesterday's heavy session.
- “On May 9, municipalities of prefectures including Saitama and Kanagawa were forced to price their bond offerings at wider spreads for a second straight month.” (per BBG)
- Cash JGBs are flat to 3bps cheaper across benchmarks, with the futures-linked 7-year leading the way. The benchmark 10-year yield is 2.9bps higher at 1.364% after yesterday's poor auction.
- The 40-year yield climbed to its highest level on record (3.374%) today amid heightened volatility from the global trade war and concerns about worsening supply and demand for super-long debt.
- “Life insurers do not need to rush to buy super-long JGBs, and lack of demand in that sector still persists, according to Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo.” (per BBG)
- Swap rates are flat out to the 10-year but 2-3bps higher beyond. Swap spreads are mixed.
- On Monday, the local calendar will see Current Account & Trade Balance and Bank Lending data.
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SCHATZ TECHS: (M5) Trading Closer To Its Recent Highs
- RES 4: 107.835 2.000 retracement proj of the Mar 4 - 6 bear leg
- RES 3: 107.800 Round number resistance
- RES 2: 107.775 High Apr 7 and the bull trigger
- RES 1: 107.660 Intraday high
- PRICE: 107.610 @ 05:53 BST Apr 9
- SUP 1: 107.235 Low Apr 7
- SUP 2: 107.120 High Mar 4 and a recent breakout level
- SUP 3: 107.005 20-day EMA
- SUP 4: 106.830 Low Mar 27
Schatz futures maintain a firmer tone and the contract is trading closer to its recent highs. Price has recently traded through a key resistance at 107.120, the Mar 4 high. This confirmed a full reversal of the Apr 3 - 6 impulsive sell-off. The break also highlights a stronger bull cycle and signals scope for a climb towards 107.800 next. Initial firm support is seen at 107.005, the 20-day EMA.
GBPUSD TECHS: MA Studies Remain In Bull-Mode Position
- RES 4: 1.3274 High Oct 3 ‘24
- RES 3: 1.3207 High Apr 3 and the bull trigger
- RES 2: 1.3017 61.8% retracement of the Apr 3 - 7 sell-off
- RES 1: 1.2899 38.2% retracement of the Apr 3 - 7 sell-off
- PRICE: 1.2853 @ 06:01 BST Apr 9
- SUP 1: 1.2709 Low Apr 7
- SUP 2: 1.2654 50.0% retracement of the Jan 13 - Apr 3 bull cycle
- SUP 3: 1.2652 2.0% 10-dma envelope
- SUP 4: 1.2559 Low Feb 28
GBPUSD traded sharply lower Monday but is recovering from this week’s low. For now, the recent sell-off appears corrective. Price has traded below the 50-day EMA - a concern for bulls - however, MA studies remain in a bull mode position and this highlights a dominant uptrend. A continued recovery would open 1.2899 and 1.3017, Fibonacci retracement points. A move through Monday's 1.2709 low, would signal scope for a deeper retracement.
US TSYS: Haven Demand Under Threat From China Retaliation
TYM5 is 110-12, +1-02 from closing levels in today's Asia-Pac session.
- Cash US tsys have extended yesterday's decline during the Asia-Pac session. The sell-off reflects growing concerns that China may retaliate against tariffs by offloading US assets, including US tsys.
- Alongside the steepening of the curve, interest-rate swaps have extended their recent extreme outperformance of US tsy securities as traders sought to avoid costs associated with holding bonds.
- Cash US tsys are currently trading 2-17bps cheaper across benchmarks, with the curve steeper.
- Yesterday, Trump officials confirmed the 104% tariff on China went into effect at noon. Concurrently, China vowed to "fight to the end".
- On the local front, the focus turns to the March FOMC minute release at 1400ET today, CPI on Thursday and PPI on Friday morning.
- Reminder, banks kick off the latest earnings cycle this Friday with Bank of New York Mellon, Wells Fargo & Co, JPMorgan Chase and Morgan Stanley reporting.
