JGBS: Futures Fade Early Rise, JGB Yields Little Changed
JGB futures are off earlier highs. After drifting up to 137.40 after the open, we are back around 137.32, -.04, in latest dealings. This keeps us above Tuesday lows, (137.22), but the bias appears to be skewed lower at this stage. Some negative spill over is likely from weaker US 10yr Tsy futures, although aggregate moves are modest at this stage. (TY futures adown -02+).
- Cash JGB yields have opened up little changed, the 10yr remains close to 1.63%. The JGB 2/30 curve sits a touch flatter versus recent levels, last around +233bps.
- In the swap space, we are a touch yield in yield terms.
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US STOCKS: Gaps Higher On The Asian Open, Reacting To US-EU trade Deal
The ESU5 Friday night range was 6401.00 - 6431.00, Asia is currently trading around 6449. The September contract continues to make all-time highs as retail buying continues to squeeze the badly positioned institutional crowd. This morning has seen US futures gap higher in response to the US-EU trade deal, ESU5 +0.38%, NQU5 +0.52%. The animal spirits remain strong even though price is looking stretched. While above the 6230/50 area dips will probably continue to be supported, a break below this support is needed to signal a possible correction. There is lots of event risk coming up this week and we are heading into month-end so caution is warranted.
- Wei Li(CIS BlackRock) - “This is not your TYPICAL CYCLE - think about loosening inflation anchor, loosening fiscal anchor, and loosening growth anchor - because we are in a SUPER CYCLE of mega forces such as AI and low carbon transition. It goes beyond the cyclical ebbs and flows, and the latest case in point is, hyperscalers are again raising capex targets this week.”
- Otavio Costa on X: “US money supply just reached all-time highs again.”
- Daily Chartbook on X: "Now touching extreme optimism. Would be logical to see the market cool between mid-August and mid-October."@WarrenPies
- "We may be moving towards later innings of the short covering given the magnitude of these moves." Goldman Sachs via @neilksethi. See Graph Below.
- Lance Roberts on X: "Citadel Securities’ retail activity has been a buyer of cash equities for the past 19 straight trading sessions. This is the longest daily buying streak in the past 4 years (since March 2021) and 5th longest streak on record)" - Scott Rubner @themarketear
- Short-term this continues to look stretched but it's very hard to fight a market with this type of momentum. First support is back towards the 6000/6100 area.
Fig 1: Hi/Lo Short Interest
Source: MNI/@dailychartbook/Goldman Sachs
FOREX: Asset Managers Sell GBP, AUD & Buy EUR - CFTC
Last week saw asset managers selling both GBP and AUD in decent size, while adding to the EUR. Trends on the leveraged side were more mixed.
- For JPY, we saw little net change in positioning with leveraged investors trimming net shorts modestly, while asset managers added a touch to the net long position.
- EUR trends were mixed, with leveraged investors further selling down EUR holdings, which are still modestly long. Asset managers more than offset these flows though by adding to the already large net long position.
- GBP flows saw leveraged investors add to longs, but asset managers were large sellers of GBP. This segment's outright short is now the largest since mid Feb of this year.
- It was a similar backdrop for the A$, where leveraged investors pared shorts, but asset managers added to their outright holdings.
Table 1: CFTC FX Positioning By Currency - Weekly Change/Outright Positioning
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | 1035 | -11571 | 716 | 72326 |
| EUR | -8110 | 7151 | 15494 | 399754 |
| GBP | 5066 | 53535 | -31991 | -58458 |
| AUD | 8038 | -12010 | -15692 | -53959 |
| NZD | -584 | -7328 | -3158 | 5034 |
| CAD | -3332 | -29725 | 2134 | -47805 |
| CHF | -2602 | -2761 | 254 | -33768 |
| MXN | 9898 | 9150 | -4702 | 38373 |
Source: Bloomberg Finance L.P./CFTC/MNI
GOLD: Bullion Trending Lower But Monitoring Events Closely
Gold prices trended lower through Friday’s sessions to be down 0.9% to $3337.30 and are slightly lower at the start of Monday’s trading at $3331.7 on lower safe haven flows as trade deals with the US continue to be announced. Over the weekend the EU reached an agreement for flat tariffs of 15%. The stronger US dollar following President Trump stating he had no intentions of removing Fed Chair Powell also weighed on bullion late last week (BBDXY USD +0.3%).
- Markets are watching this week’s August 1 deadline closely as negotiations with the US continue. In addition, there are the Fed’s decision on July 30, Q2 GDP & June PCE July 30 & 31, and US July payrolls August 1.
- The EU also arranged to buy $750bn of US energy over the remainder of President Trump’s term and invest $600bn in the US. Doubt remains over how the agreement will be implemented, especially the investment component.
- US-China talks begin today with the principle aim to extend the current tariff rates, which the South China Morning Post said is likely to be by 3 months (Bloomberg).
- Gold was down 0.4% last week but this is considered corrective and it is still up 1% in July. The bull cycle begun 30 June is still intact with initial resistance at $3439.0, 23 Jul high, and the bull trigger at $3500.1. Initial support is at $3322.6, 20-day EMA.
- Silver is steady today at around $38.17 after falling 2.3% to $38.16 on Friday, as a result it was flat on the week but still 5.7% higher this month. Friday’s low of $37.96 remained above initial support at $37.77, 20-day EMA. Resistance is at $39.66.
