AUSSIE BONDS: Futures Higher, AU-US 10yr Spread To Multi Month Highs
Aussie bond futures have opened Friday trade with a positive tone, with the back end outperforming. This is following offshore leads overnight, particularly in the US. The Aussie 10yr future (XM) was last 1.5bps higher at 95.635, while 3yr futures (YM), where little changed, last at 96.515.
- US Treasury yields moved lower overnight as data shows the labour market continues to cool; the long-end led the move and this saw the yield curve flatten (2s10s -2.72 at 57.089, 5s30s +0.32 at 120.594). The early bias today is for firmer US Tsy futures.
- In the cash ACGB space so far today, yields are mostly lower, led by the 10yr. We were last down close to 1.5bps, to be just under 4.34%. The 3yr benchmark was near 3.47%.
- The AU 3/10s curve is slightly flatter at +87bps.
- The AU-US 10yr yield differential is around +18bps, just off fresh multi month highs.
- The local data calendar just has August FX reserves out today. Next week we get Westpac Consumer Sentiment and the NAB Business survey on Tuesday.
- "Australian Prime Minister Anthony Albanese says he had another "warm and constructive" conversation with US President Donald Trump on Thursday night, he writes in a X post. The two leaders discussed trade and economic relationship as well as areas for growth including critical minerals. They also discussed shared US-Australia security interests." (via BBG)
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JPY: USD/JPY - Consolidating Below 148.00
The overnight range was 147.03 - 147.83, Asia is currently trading around 147.55. USD/JPY managed to bounce off its support around 146.50 but has again stalled back towards the 148.00 area as risk closes poorly. Price has moved very quickly away from the pivotal 151/152 area much to the relief of Institutional JPY longs and the BOJ. CFTC Data shows leveraged accounts had started to aggressively build Yen shorts last week so this quick move lower would be a bitter pill to swallow. Price is holding above the support area around 146.50/147.00, a move sub 145.00 is needed to turn momentum lower once more, until then the 145.00-151-00 range should dominate.
- Bloomberg - “ In a break from a decades-old policy, the Japanese government will encourage farmers to disregard a de facto cap on rice production and boost cultivation of the food staple, a step that could win support from the agriculture sector and soothe consumers' frustration over soaring living costs.”
- “(Bloomberg) - The Japanese yen has rallied more than 2% so far this month, among the biggest gainers out of 31 G-10 and EM currencies tracked by Bloomberg. The outperformance will persist as stalling US economic growth boosts the yen’s haven appeal, while seasonal patterns support an extension of the rally.” - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 147.00($1.5b).Upcoming Close Strikes : 147.65($1.14b Aug 7), 148.50($1.24b Aug 7) - BBG.
- CFTC data shows asset managers surprisingly added slightly to their JPY longs +75119( Last +72326), while leveraged funds aggressively added to their newly built short JPY position -31280(Last -11571).
- Data/Event : Real Cash Earnings
Fig 1 : USD/JPY Spot 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
NEW ZEALAND: Unemployment Lower Than Expected, Private Wages Higher
Q2 NZ employment fell 0.1% q/q to be down 0.9% y/y, in line with consensus, and the unemployment rate rose 0.1pp to 5.2%, slightly lower than expected but in line with the RBNZ’s May forecast. It is the highest rate since Q4 2016 excluding Covid. Private wages were higher than expected rising 0.6% q/q, but in line with the RBNZ. See Statistics NZ press release here. More details to follow.
NZD: NZ Unemployment Reaction
*NZ 2Q EMPLOYMENT FALLS 0.9% Y/Y; EST. -0.9%, NZ 2Q EMPLOYMENT FALLS 0.1% Q/Q; EST. -0.1%, NZ 2Q JOBLESS RATE 5.2%; EST. 5.3% - BBG . NZD/USD went into the announcement trading around 0.5895 and has had a muted response bouncing 10bps in reaction, the NZX50 went into the print down 0.10% at 12865.
- NZDUSD - 0.5905, +0.03%
- AUD/NZD - 1.0965, +0.02%
- NZD/JPY - 87.10, - 0.03%
- NZX50 - 12860, -0.13%%
