BONDS: EGBs-GILTS CASH CLOSE: Late Sell-Off Cements German Bear Steepening
European curves steepened Wednesday, with Bunds underperforming Gilts ahead of the BOE decision.
- Early trade saw modest bear steepening across the space, with German supply weighing on long-end Bunds.
- Yields began to rise in late afternoon but suddenly spiked less than 30 minutes before the European cash close on what some desks called an erroneous trade. While yields came back down, they closed well off their lows.
- German factory orders data were weaker than expected, compared with Italian industrial production which surprised to the upside and Eurozone retail sales which were largely in line. None of the data had any major market impact.
- The German curve bear steepened slightly on the day, with the UK's twist steepening. Periphery/semi-core EGB spreads closed mixed.
- Thursday's BOE decision is the calendar highlight of the week - MNI's preview is here.
- Along with the expected 25bp rate cut, focus will be
on the vote split, the tone of the press conference, any changes to assumptions in the scenarios and any signalling ahead of September’s QT decision.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 1bps at 1.918%, 5-Yr is up 2bps at 2.235%, 10-Yr is up 2.6bps at 2.65%, and 30-Yr is up 3.5bps at 3.173%.
- UK: The 2-Yr yield is down 0.5bps at 3.821%, 5-Yr is up 0.3bps at 3.959%, 10-Yr is up 1bps at 4.526%, and 30-Yr is up 2.1bps at 5.36%.
- Italian BTP spread down 0.4bps at 79.8bps / French OAT up 0.7bps at 66.6bps
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USDJPY TECHS: Trades Through The 50-Day EMA
- RES 4: 148.65 High May 12 and a reversal trigger
- RES 3: 148.03 High Jun 23
- RES 2: 146.19/146.77 High Jun 24 / 76.4% of Jun 23 - Jul1 bear leg
- RES 1: 145.82 High Jul 07
- PRICE: 145.77 @ 15:52 BST Jul 7
- SUP 1: 144.18/142.68 Low Jul 4 / 1
- SUP 2: 142.12 Low May 27 and a key short-term support
- SUP 3: 141.96 76.4% retracement of the Apr 22 - May 12 upleg
- SUP 4: 141.49 Low Apr 23
USDJPY has started the week on a firmer note. Price has breached the 50-day EMA, at 144.91, and a close above it would highlight a stronger reversal. This would expose 146.19, the Jun 24 high. For now, gains still appear corrective. Moving average studies are in a bear-mode position, signalling a dominant downtrend. A resumption of weakness would open 142.12, the May 27 low and a key short-term support.
US STOCKS: Extending Lows Yet Again on More Tariff Tweets
- Stocks extend late session lows after latest tariff announcements via Pres Trump's social media platform: 25% on goods from Malaysia and Kazakhstan, 30% on South Africa, and 40% on Laos.
- Currently, the DJIA trades down 664.11 points (-1.48%) at 44163.91, S&P E-Minis down 76.5 points (-1.21%) at 6247.5, Nasdaq down 265.4 points (-1.3%) at 20335.29.
- Energy, Consumer Discretionary, Materials, Financials and Health Care sectors underperforming.
- Main laggers in the second half include: Tesla -7.01%, First Solar -4.39%, Dow Inc -4.22%, Lululemon Athletica -4.21%, EOG Resources -3.74%, Halliburton -3.62%, Old Dominion Freight Line -3.58% and Albemarle Corp -3.53%.
TARIFFS: Trump: Tariff Rates Of 25% On Malaysia, 30% On South Africa
Trump announces on Truth Social the following tariff rates to be imposed on Aug 1 (in similar letters to those seen sent earlier to Japan and South Korea). White House Press Secretary Leavitt announced earlier that there would be 12 letters sent today - this is 5 of those sent in a quick burst, implying 7 more to be announced later.
- 25% tariffs on Malaysia and Kazakhstan - had been announced at 24% / 27% respectively before tariff "pause"
- 30% on South Africa (USDZAR quickly rises 0.3%) - had been announced at 31% before tariff "pause"
- 40% on Laos and Myanmar - had been announced at 48% / 45% respectively before tariff "pause"
