JGBS: Futures Downtrend Intact, Dec Hike Pricing Around 64%, Ueda Speech Later
On Friday, JGB futures finished the post Tokyo close period at 134.95, -.18 versus settlement levels. This leaves the technical bias in a downtrend, with downside focus on the Nov 19 low at 134.56, which is also the cycle low. Key short-term resistance has been defined at 137.30, the Sep 8 high.
- The key focus today will be on BoJ Governor Ueda's speech. The Japan Times via Bloomberg: "Market participants are increasingly speculating that the Bank of Japan could raise its policy interest rate in December, in light of recent remarks by senior BOJ officials indicating the central bank's willingness to revise its monetary policy soon."
- Market pricing for a Dec hike has risen in recent sessions, with an implied rate around 0.63%, versus a current effective policy rate of 0.477%. The Jan meeting has close to a full 25bps hike priced in. These odds could shift depending on Ueda's bias today. A wait and see bias from Ueda (needing to see early 2026 data etc) could lower Dec hike odds notably.
- Before Ueda speaks (which is due around 10:05am local time), we have Q3 capex spending, along with company sales and profits. Capex (ex software) is expected at 5.4%y/y, versus 5.2% prior.
- In the cash JGB space the 10yr finished last week just above 1.81%. Recent cycle highs were around 1.845%. The 2yr was near 0.98%, eyeing an upside test of 1.00%, although has only moved moderately higher in recent weeks. The 30yr finished up last week at 3.35%. The 2/30s curve was at +237bps, just under recent highs (+242bps).
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
