JGBS: Futures Holding Recent Ranges, All Eyes On 30yr Auction Today

In post-Tokyo trade, JGB futures closed stronger, +19 compared to settlement levels, after US tsys rallied even after the extreme richening on Friday and in spite of upcoming Treasury supply. 

• Fed rate cut bets and further declines in oil prices supported. The 2-year yield was fractionally lower at 3.68% but still 27bps below Thursday's level. The 10-year slid 2bps to 4.219%, extending the move down from 4.385% before the jobs data. It is the lowest since the end of April.
• "Japan is finally out of the grip of deflation that defined its lost decades - but now faces classic signs of stagflation. Inflation is climbing, buoyed by wage gains and rising price expectations. Fiscal policy is set to turn more expansionary after the government's upper house loss, adding inflationary pressure from the demand side. But the Bank of Japan is still taking a cautious approach to its next rate hike, even after a trade agreement with the US helped ease tariff uncertainty, viewing the recent price surge as transitory." - BBG
• Today, the local calendar will see the BoJ Minutes for the June Meeting alongside 10-year supply.

ACGBs (YM +4.0 & XM +6.0) are stronger after a modest bull-flattener from US tsys on Tuesday.                                        

• Bargain hunters helped US equities recover their footing and recoup a lot of the dive into the weekend. Gains were broad-based. The NASDAQ bounced 1.75% after closing on Friday with a 2.25% loss, while the S&P 500 advanced ~1.35% following its ~1.60% decline.
• S&P Global PMIs for July have printed: Services Index rises to 54.1 from 51.8 in June; Composite Index rises to 53.8 from 51.6 in June.
• Cash ACGBs are 12-15bps richer after being closed for a bank holiday yesterday, with the AU-US 10-year yield differential at flat.
• The bills strip is richer, with pricing +2 to +4.
• RBA-dated OIS pricing is giving a 25bp rate cut in August a 100% probability, with a cumulative 67bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• Today, the local calendar will also see ANZ-Indeed Job Advertisements and Household Spending data.
• This week, the AOFM plans to sell A$300mn of the 4.25% 21 June 2034 bond on Tuesday, A$900mn of the 4.25% 21 March 2036 bond on Wednesday and A$1000mn of the 3.00% 21 November 2033 bond on Friday.

In local morning trade, NZGBs are 4bps richer after US tsys finished with a modest bull-flattener.

• Factory orders fell -4.8% M/M (sa, cons -4.8) in June after 8.3% (initial 8.2) in May as they confirmed gyrations driven by nondefense aircraft in the previously released durable goods data (-52% M/M in June after 232% in May).
• Looking ahead to Tuesday: China composite and manufacturing PMI data, final PMI prints across Europe and the US as well as the US ISM services index for July.
• RBNZ dated OIS pricing is showing 23bps of easing is priced for August, with a cumulative 41bps by November 2025.
• Today, the local calendar will see ANZ Commodity Prices.
• The focus of the week will be the Q2 labour market data published on Wednesday. It is expected to show that it weakened in the quarter after some signs of stabilisation in Q1. The unemployment rate is forecast to rise 0.2pp to 5.3% more than the RBNZ's 5.2% May projection. If the data print is as weak as or weaker than the Bloomberg consensus, then a rate cut on August 20 is likely.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.