JGBS: Futures Dips Supported, BoJ Pricing Little Changed Past Week
JGBs tracked lower at the open, with some negative spill over likely from the firmer Oct Tokyo CPI print. Still, we have since rebounded modestly, last 136.15, -.05 versus settlement levels, at the lunch time break. Earlier lows were around 135.95. This keeps us in recent ranges, with a fairly indifferent lead from US Tsy futures at this stage.
- The Tokyo CPI print showed strong m/m momentum across most key categories and a pick up in y/y to 2.8%. Still, the central bank is likely to want to see further m/m gains before shifting its broader inflation expectations.
- Wages is also the other key focus point, with earlier data some softening in the labour market via a higher unemployment rate, but we remain with recent ranges.
- The FinMin maintained FX jawboning, but FX intervention risks don't look imminent (based off past language used by officials)
- Market pricing for the Dec meeting, per OIS, is around a 0.60% implied rate, little changed since the end of last week. A full 25bps hike is close to fully priced for the March meeting (using an effective rate of 0.477%).
- Cash JGB yields are drifting lower, the 10yr to 1.65%, while the 30yr continues to drift lower under 3.04%, so sub the 100-day EMA support now. The 2/30s curve remains steady around +211.5bps.
- Looking ahead to next week, the main focus will be on the Sep labour cash earnings data, out on Thursday. This data was softer in recent months.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE BONDS: Holding Cheaper, Market Continues To Price Out RBA Cut
ACGBs (YM -4.0 & XM -5.5) remain weaker.
- S&P Global PMI Manufacturing Index falls to 51.4 from 53 in Aug.
- Cash US tsys are slightly cheaper in today's Asia-Pac session after yesterday's modest twist-steepener.
- Cash ACGBs are 4-7bps cheaper with the AU-US 10-year yield differential at +22bps.
- The latest ACGB Dec-34 supply achieved a weighted average yield that printed 0.40bp through prevailing mids (per Yieldbroker). However, the cover ratio decreased to 2.1033x, thelowest since its debut in 2023, from 3.1708x.
- The bills strip is -4 to -6 beyond the first contract.
- RBA-dated OIS pricing has firmed modestly across meetings following yesterday’s RBA Policy Decision. Pricing across meetings is 1-4bps firmer than yesterday’s pre-RBA levels. Notably, this post-RBA move leaves pricing some 10-19bps firmer than last Wednesday’s pre-CPI levels.
- A 25bp rate cut in October is given a 35% probability, with a cumulative 11bps of easing priced by year-end.
STIR: RBA Dated OIS’ Firming Since August CPI Extends After RBA Decision
RBA-dated OIS pricing has firmed modestly across meetings following yesterday’s RBA Policy Decision.
- At the time of writing, pricing across meetings was 1-4bps firmer than yesterday’s pre-RBA levels.
- Notably, this post-RBA move leaves pricing some 10-19bps firmer than last Wednesday’s pre-CPI levels.
- A 25bp rate cut in October is given a 35% probability, with a cumulative 11bps of easing priced by year-end.
Figure 1: RBA-Dated OIS – Current Vs. Pre-CPI
Source: Bloomberg Finance LP / MNI
CRYPTO: Ethereum - Bounces, Technically $4300-$4500 To Be Faded First Up
Ethereum had a range overnight of $4093.19 - $4208.98, Asia is trading around $4152, -1.05%. Ethereum had a decent bounce after triggering stop losses sub $4000 last week. Having broken big support around $4100, technically rallies should now be faded initially. The first sell zone is now back towards the $4300/$4500 area.
- Menthor Q on X: "Crypto asset flows. "Digital asset investment products saw US$812m in outflows last week, though YTD inflows remain robust at US$39.6bn, close to last year’s record ... Bitcoin (-US$719m) and Ethereum (-US$409m) faced pressure, while Solana (+US$291m) attracted strong inflows.”
- Milk Road on X: “For a decade, crypto has moved in 2yr up / 2yr down cycles, pointing to a 2025 peak. But the data just shifted. PMI, liquidity, and analysts all say the cycle hasn’t ended, it’s been extended. The top now looks more like 2026… or later”
- “FTX will release $1.6B in stablecoins to creditors today. That’s $1.6B in fresh liquidity about to hit the crypto markets. Fresh powder is on the way.”
Fig 1: Ethereum spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
