USDJPY TECHS: Clears The Bull Trigger

Spain, Belgium, Finland and Ireland are all still to sell bills this week. Germany and France issued bills yesterday. We estimate issuance of E16.2bln in first round operations, down from last week's E31.6bln.

• Germany kicked off issuance yesterday morning with E3bln of the 6-month Mar 22, 2023 bubill (E1.870bln allotted).
• Monday afternoon, France sold E5.519bln of 12/21/51-week BTFs, close to the top of the target range: E2.596bln of the 12-week Dec 7, 2022 BTF, E1.425bln of the 21-week Feb 8, 2023 BTF and E1.498bln of the new 51-week Sep 6, 2023 BTF.
• This morning, Spain will look to sell E1.5-2.5bln 3/9-month letras: 3-month Dec 9, 2022 letras and 9-month Jun 9, 2023 letras.
• Belgium will then look to sell E2.8-3.2bln of 4/12-month TCs: an indicative E1bln of the Jan 12, 2023 TC and an indicative E2bln of the new Sep 14, 2023 TC.
• Also today, Finland will look to sell up to E1bln of the 5-month Feb 13, 2023 RFTB and up to E1bln of the 8-month May 12, 2023 RFTB.
• Ireland will conclude bill issuance for the week on Thursday with E750mln of the 3-month Dec 19, 2022 IRTB on offer.

JGB futures are +29 ticks at 149.00 last, printing through its overnight high after the lunch break, aided by a bid in wider core global FI markets.

• Cash JGBs run 0.5bp cheaper to 4.0bp richer across the curve, twist flattening, and pivoting around 4s.
• The bid in the super-long end may be a result of continued interest on the part of domestic life insurers and pension funds after last week saw the super-long end test/register cycle highs in yield terms, while 10-Year JGBs continue to operate just shy of the upper limit of the BoJ’s permitted trading band.
• A solid round of 5-Year JGB supply saw cover and pricing metrics improving from the previous auction, likely reflecting the attractive outright and relative value observed. A light bid in 5s was observed post-auction, with yields hitting fresh session lows.
• Looking ahead, Wednesday will see core machine orders and industrial production data on tap, with BoJ Rinban operations covering 1-3, 5-10, and 25+-Year JGBs due as well.

Note that Monday saw RBC enter long EUR/USD as their G10 thematic trade of the week, with an entry of $1.0142, target of $1.0350 and stop at $1.0040.

• They noted that “heading into U.S. CPI markets are priced for a 73bp hike at next week’s FOMC meeting and terminal rate pricing is at a cycle high of just over 4.00%. Both could fall significantly if the inflation data surprise to the downside, but there is limited scope for repricing higher on an upside surprise.”
• “Since mid-August higher U.S. yields have been associated with weaker equity prices and as usual, weakness in both major asset classes has been associated with broad USD gains.”
• “We position for a short-term reversal of all three moves around the CPI data and favour expressing this in EUR/USD rather than USD/JPY, where a positive equity response would dilute the impact of lower rates.”