MNI EXCLUSIVE: Ex-BOJ Kameda Sees Dec Hike

JGB futures remain weaker, -6 compared to settlement levels, but well off lows after today’s less weak than feared 30-year auction.

• The 30-year JGB auction delivered mixed results. However, the 30-year has rallied strongly following the result, suggesting that the recent bear-steepening was overdone. Although newly elected Liberal Democratic Party leader Sanae Takaichi is perceived to have an expansionary fiscal and monetary policy stance, a lot of these expectations appear to have been priced into the market.
• MNI - Japan household spending for August was stronger than forecast (+2.3%y/y, versus 1.2% forecast, 1.4% prior). We are below earlier 2025 highs from a y/y momentum standpoint, but the trend has steadily improved from late 2024 lows. It should add, albeit at the margins, to the case for a further BoJ rate hike, although little is priced for the Oct meeting.
• Cash US tsys are little changed in today's Asia-Pac session.
• Cash JGBs have twist-flattened across benchmarks after today’s 30-year auction. The benchmark 30-year yield is 3.9bps lower at 3.267% after setting a fresh cycle high of 3.351% earlier in the session.
• Swap rates are flat to 7bps lower, with swap spreads tighter.
• Tomorrow, the local calendar will see Cash Earnings, BoP Current Account Balance and Trade Balance data.

• 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 High Sep 17 and a bull trigger
• RES 1: 1.1779/1820 High Oct 1 / High Sep 23  
• PRICE: 1.1696 @ 06:05 BST Oct 7
• SUP 1: 1.1690/46 50-day EMA / 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 primary trend direction in EURUSD is up and recent weakness appears corrective. Support to watch is 1.1690, the 50-day EMA. It has been pierced, a clear break of the EMA is required to signal scope for a deeper retracement and expose 1.1574, the Aug 27 low. For bulls, a clear  resumption of gains would open 1.1923, a Fibonacci projection. Note that moving average studies are in a bull-mode position highlighting a dominant medium-term uptrend.

ACGBs (YM +1.5 & XM +0.5) sit modestly higher after today’s weak data.

• "Australia's consumer confidence slipped to a six-month low this month on renewed doubts about hopes of future interest rate cuts given recent strength in inflation." - BBG
• ANZ-Indeed job advertisements dropped 3.3% from a month earlier in September, the largest monthly decline since February 2024.
• Cash US tsys are flat to 1bp richer, with a flattening bias, in today's Asia-Pac session after today’s 30Y JGB auction sparked a relief rally in global bonds. Cash US tsys had been 1bp cheaper earlier. Although newly elected Liberal Democratic Party leader Sanae Takaichi is perceived to have an expansionary fiscal and monetary policy stance, a lot of these expectations appear to have been priced into the market.
• Cash ACGBs are 2-6bps cheaper, after being closed yesterday, with the AU-US 10-year yield differential at 24bps.
• The bills strip is +1 to +2 across contracts.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in November is given a 39% probability, with a cumulative 13bps of easing priced by year-end (based on an effective cash rate of 3.60%).
• The AOFM plans to sell A$1200mn of the 4.25% 21 March 2036 bond tomorrow.
• Tomorrow, the local calendar will also see Foreign Reserves data.