JGBS: Futures Lower, But Recent Ranges Holding, 2/30s JGB Curve Steeper
JGB futures are biased lower in early Wednesday dealings, although we haven't tested sub 137.20 yet. We were last 137.28, -.24 versus settlement levels. Session lows rest at 137.23.
- The focus is on cash JGB yields, particularly the 30yr. We were last above 3.27%, up around 5bps in yield terms. This puts us at fresh cycle highs. The JGB 2/30s curve is now near +240bps, so back close to May cycle highs.
- The outright 10yr yield is near 1.63%, little change so far today. The 20 and 40yr yield benchmarks are up 3-4bps.
- Swap rates are also biased higher, although are showing less aggregate moves compared to cash JGB yields at this stage.
- The 30yr yield is likely to remain in focus, given pressure in longer dated global yields (US 30yr eyeing a test of 5%), while onshore political uncertainty may also be a driver. Note as well tomorrow we have the 30yr debt auction.
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FED: Trump To Announce Candidate To Replace Kugler In Next Few Days
US President Trump has stated that he will announce a candidate to replace Fed Governor Kugler in the next few days. Rtrs notes: "U.S. President Donald Trump said on Sunday he will announce a candidate to fill an open position at the Federal Reserve in the next couple of days. The Fed said on Friday that Governor Adriana Kugler was resigning early from her term, leaving an opening for Trump, a sharp critic of the U.S. central bank's leadership, to fill."
US TSYS: Cash Open
TYU5 is trading 112-10+, up 0-04 from its close.
- The US 2-year yield opens around 3.66%, down 0.02 from its close.
- The US 10-year yield opens around 4.206%, down 0.1 from its close.
- Daily Chartbook on X: "If not for collapsing labor force participation since April, unemployment would've climbed to 4.9% [yesterday] instead of 4.25%." @Econ_Parker. See Graph Below.
- Brian Sullivan on X: “Goldman Sachs notes that the recent 2 month job revisions were the largest outside recessionary times since … 1968. Goldman expects more large revisions next month.”
- MNI BRIEF: Fed Hammack: Jobs Bear Watching, Inflation To Rise. "Disappointing signs" in the July jobs report bear careful watching, but the U.S. labor market remains largely in balance, Federal Reserve Bank of Cleveland President Beth Hammack said Friday after Bureau of Labor Statistics data showed a sharp slowdown in hiring over the past few months. "It looks like a healthy labor market that's still well in balance, but with some disappointing signs that we should watch very carefully," she told Bloomberg Television.
- The 10-year yield had a powerful move lower in reaction to the NFP data, breaking below its 4.30% pivot within the wider range 4.10% - 4.65%. This now turns momentum lower in yields and you could expect buyers of treasuries on bounces back towards 4.30/35% now looking to initially test the 4.10% area. The move was even more aggressive in the 2-year which has rejected the move back towards 4% and now looks to target the pivotal 3.50% area.
- Data/Events: Factory Orders, Durable Goods
Fig 1: US Unemployment
Source: MNI - Market News/@dailychartbook/Arch Capital
AUSTRALIA: June Consumption Growth Forecast To Rise
In a week of second tier data, the focus is likely to be on Tuesday’s June household spending data which will now replace retail sales, which had its last print last week. The Q2 chain volume measure is also out. Bloomberg consensus expects June consumption values to rise 0.8% m/m to be up 4.9% y/y after 4.2% in May. The ABS noted that discounting in the month had boosted June retail sales.
- Today, the July Melbourne Institute inflation gauge is released. It printed at 2.4% y/y in June above headline CPI at 1.9%.
- Tuesday sees the final services and composite S&P Global PMIs for July. The preliminary print saw a 2 point rise in the composite to 53.6 suggesting a pickup in growth at the start of Q3.
- June trade data are released on Thursday. The trade surplus is forecast to widen to $3.25bn from $2.24bn.
- In terms of the RBA, Head of Payments Policy Connolly participates in a panel at the ACCC/AER regulatory conference at 1045 AEST on Thursday.
