JGBS: Futures Higher Overnight With US Tsys, Risk-Off Sentiment
In post-Tokyo trade, JGB futures closed stronger, +32 compared to settlement levels, after US tsys enjoyed another solid session with carry-over risk-off support.
- Heavy volumes in Tsy futures, tied to Mar'25/Jun'25 rolling, with both Mar'25 5Y and 10Y contracts well over 5M after the bell.
- US data underpinned rates: Conference Board's consumer confidence composite fell to 98.3 from 105.3 prior (102.5 expected), led by a drop in expectations to 72.9 from 82.2. February's Philadelphia Fed Non-Manufacturing survey showed a deterioration in current regional activity to a 6-month low -13.1 from -9.1 prior (no consensus).
- "Like our Steel and Aluminum Industries, our Great American Copper Industry has been decimated by global actors attacking our domestic production. To build back our Copper Industry, I have requested my Secretary of Commerce and USTR to study Copper Imports, and end Unfair Trade putting Americans out of work. Tariffs will help build back our American Copper Industry, and strengthen our National Defense.” (per Pres. Trump)
- Lower yields and pressure on major equity indices boosted the likes of JPY and CHF.
- Today’s US data includes New Home Sales and Building Permits. The main focus is on GDP and PCE data on Thursday.
- Today, the local calendar will see Leading and Coincident Indices alongside BoJ Rinban Operations covering 3-25-year JGBs.
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AUSSIE 3-YEAR TECHS: (H5) Corrective Bounce
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.190/360 High Dec 31 / High Dec 11
- PRICE: 96.110 @ 15:48 GMT Jan 24
- SUP 1: 95.830 - 1.000 proj of the Dec 11 - 20 - 31 price swing
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
A bear cycle in Aussie 3-yr futures remains intact and short-term gains are considered corrective. The recent move down reinforces the bear theme and the contract has traded through the December low. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low. On the upside, a clear reversal would instead signal scope for an extension towards 96.190, the Dec 31 high, and 96.360, the Dec 11 high.
BONDS: NZGBS: Subdued Session Expected
NZGBs are 1bp richer in local morning trade after US tsys finished Friday mildly stronger.
- Surprisingly, the S&P Global US composite PMI fell in the January flash, showing its lowest since April, after 55.4 in December, which marked a 32-month high.
- However, firms' expectations of output over the coming year remain strong looking at policies under the second Trump administration. Inflationary pressures saw a four-month high which helped limit the dovish reaction from the headline services miss.
- Meanwhile, U.Mich long-run inflation expectations were trimmed in the final January release from what had been a particularly sharp increase to the highest since 2008. 3.2% is still elevated though, having twice in the past three months exceeded what had been a typical 2.9-3.1% range since mid-2021.
- Focus this week is the FOMC policy announcement on Wednesday.
- BNZ Job ads index fell 2.1% m/m (22% y/y) following a 1% increase in November.
- It is expected to be a subdued session given Auckland Anniversary and Australia Day holidays.
- Swap rates are unchanged.
- RBNZ dated OIS pricing is unchanged. 47bps of easing is priced for February, with a cumulative 109bps by November 2025.
AUSSIE 10-YEAR TECHS: (H5) Resistance Remains Intact
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.615/851 - High Dec 31 / High Dec 11
- PRICE: 95.510 @ 15:51 GMT Jan 24
- SUP 1: 95.275 - Low Nov 14 (cont) and a key support
- SUP 2: 94.477 - 1.000 proj of the Dec 11 - 23 - 31 price swing
- SUP 3: 94.495 - 1.0% 10-dma envelope
The Aussie 10-yr futures contract continues to trade below the Dec 11 high of 95.851, and has traded through the Dec low. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish theme. For bulls, a confirmed reversal and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point.
