JGBS: Futures Flat, Narrow Range, Curve Flatter
JGB futures sit flat, off the extremes of a narrow range after domestic economic data failed to provide a meaningly local driver for the market. US Tsys also provided little in way of a catalyst with pricing basically unchanged in Asia-Pac trade.
- JBM3 is currently trading at 147.44, within the range of 147.40-147.92, where it has remained since early April. In the past two days, the JGB futures contract briefly fell below the lower limit of this range twice, but managed to bounce back.
- Cash JGBs are mixed with yields out to the 10-year 0.5bp richer to 0.2bp cheaper and beyond 1.6-3.0bp richer. The benchmark 10-year yield is 0.1bp higher at 0.476%, below the BoJ's YCC limit of 0.50%.
- Swap spreads are wider across the curve, with the swap curve twist flattening.
- Looking ahead, trade balance and weekly international security flow data headline domestically on Thursday, with 20-Year JGB supply also due.
- Participants also remain on the lookout for some of the more sizable life insurer and pension fund investment plans, which should filter out of the coming 10 days or so (see more on that here).
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BOBL TECHS: (M3) Breaches The 119.000 Handle
- RES 4: 120.220 Low Dec 6 2022
- RES 3: 120.00 Psychological resistance
- RES 2: 119.580 High Dec 9 2022 (cont)
- RES 1: 119.470 High Mar 17
- PRICE: 119.070 @ 05:12 GMT Mar 20
- SUP 1: 117.354 38.2% retracement of the Mar 6 - 17 rally
- SUP 2: 117.820 Low Mar 17
- SUP 3: 116.954 20-day EMA
- SUP 4: 116.547 50.0% retracement of the Mar 6 - 17 rall
Bobl futures traded higher Friday and price has cleared the 119.00 handle. The outlook remains bullish following last week’s volatile price action. A continuation higher would pave the way for gains towards 119.580, the Dec 9 2022 high on the continuation chart. Further out, scope would be seen for a climb to the 120.00 psychological handle. On the downside, key short-term support is seen at the 20-day EMA which intersects at 116.954.
BUND TECHS: (M3) Bullish Theme Intact
- RES 4: 140.00 Psychological round number
- RES 3: 139.40 High Jan 18
- RES 2: 139.00 Round number resistance
- RES 1: 138.48 High Mar 17
- PRICE: 137.85 @ 05:02 GMT Mar 20
- SUP 1: 136.56 23.6% retracement of the rally from Mar 2
- SUP 2: 135.73 Low Mar 16
- SUP 3: 134.30 20-day EMA
- SUP 4: 133.33 Low Mar 15
Bund futures traded higher Friday, breaching 138.00. The near-term outlook remains bullish following last week’s volatile activity. A continuation higher would pave the way for strength towards the 139.00 handle next. Key support to watch this week lies at the 20-day EMA. A reversal lower and a break of this support is required to signal scope for a deeper retracement. Initial support to watch is 136.56, a Fibonacci retracement.
EQUITIES: Financials Under Pressure On Fallout From UBS Takeover Of Credit Suisse
Regional equities started the day on a more positive footing, but this has given way to a more cautious tone as the session progressed. China is the only major regional market to be sitting in positive territory at this stage. Developments outside the region remain key, following the UBS takeover of Credit Suisse. EU futures were up +1.4% in early trade, but now sit comfortably back in the red, while US futures aren't too far away from flat, also giving up earlier gains.
- Financial stocks have been a particular focus point as holders of risky (AT1) Credit Suisse bonds reportedly face a $17bn wipeout. Similar bonds for regional bank names today have traded sharply lower with the region. This has weighed on Asia Pac financials, with a Bloomberg large & mid cap index for the sector off by nearly 2%.
- The HSI is off by over 2.5%, with the underlying tech sun-index down by ~3%. Weakness has also been evident in financials, with HSBC down sharply.
- China shares are modestly positive, being viewed as insulted somewhat from the global turmoil, while the RRR cut from late on Friday is also a positive at the margins. The CSI 300 is up 0.10-0.15% at this stage.
- In Japan, the Topix is off by around ~1.40%, with the underlying bank index off 1.90%. The Kospi (-0.64%) and Taiex (-0.29%) have fared slightly better.
- The ASX200 is down near 1.40%, with financial names again under pressure, with lower commodity prices also likely weighing on material stocks.
- In SEA, we are seeing modest outperformance from Thai equities.
