JGBS: Futures Bear Threat Persists, 40yr Auction Today, BoJ July Mins Also Out

JGB futures settled at 137.45, -.05 versus settlement levels post the Tokyo close on Monday. We remain within striking distance of July lows at 137.32. 

• The US bias was for weaker futures on Monday, as markets retraced some of Friday's rally in the aftermath of Powell's Jackson Hole speech. Some caution in markets remains ahead of key inflation data this week, whilst from Monday's US session we also better than expected housing data (which also weighed on futures). The early bias in US Tsy futures today is little changed.
• In the cash JGB space, the 10yr finished Monday trade around 1.62%, so close to recent cycle highs. The 30yr is near 3.22%. The Japan 2/30yield curve remains elevated, near +235bps. 
• In the swap space, the 10yr was last near 1.42%.
• Coming up shortly we have the July PPI services print.
• On the Supply front, Thursday delivers a 2yr bond sale, but there will be greater focus on next week's 10yr auction. 

Gold was slightly lower on Monday after Friday’s rally post comments from Fed Chair Powell suggesting that risks could warrant shifting policy. The stronger US dollar (BBDXY +0.5%) and higher yields pressured prices 0.2% lower to $3365.89/oz after reaching a high of $3376.28 but are up 2.3% in August. They are currently down to around $3362.5 and continue to move in a narrow range. 

• Pricing for a September 17 Fed rate cut moderated over yesterday but remains above 80%. Easing should be positive for non-interest bearing gold but with upside inflation risks from increased import duties the resumption of rate cuts is likely to be cautious. July PCE price data is released on Friday.
• The medium-term trend for gold remains bullish but the sideways move since April appears corrective. Initial resistance is at $3409.2, 8 August high, while support is $3311.6, 20 August low. However, hedge funds have reduced their bullish positions to a 6-week low according to CFTC data, according to Bloomberg.
• Silver fell 0.8% to $38.575, close to the intraday high, after reaching $39.001 early on Monday. The metal is up 5.1% this month but off the August 22 high of $39.064. It currently trading around $38.54.
• Equities were weaker with the S&P down 0.4% and Euro stoxx -0.8%. The S&P e-mini is currently up 0.1%. Oil was stronger with WTI +1.7% to $64.74/bbl. Copper was flat.

• MNI: UK AUG BRC SHOP PRICES +0.2% M/M, +0.9% Y/Y