JGBS: Futures Lower Overnight With US Tsys, Light Local Calendar
Jun-03 23:21
In post-Tokyo trade, JGB futures closed lower, -9 compared to settlement levels, after US tsys finished ~2bps cheaper across benchmarks. TYU5 reopens at 110-17+, up 0-03 from closing levels in today’s Asia-Pac session.
- Overnight, the US 10-year yield had a range of 4.4043% - 4.4716%, closing around 4.45%.
- The JOLTS report for April was on balance one of relative stability in another look at early reaction to Trump administration policies. Job openings surprisingly increased (7391k (sa, cons 7100k) in April after a marginal upward revised 7200k (initial 7192k) in March) whilst the hire rate pushed to its highest since September although the quits rate pushed back lower again after what to us was a surprising uptick back in March.
- Factory orders came in weaker than expected in April, with the 3.7% M/M contraction exceeding the 3.2% drop expected by consensus. Clearly, some was pulling forward of orders in March, ahead of anticipated tariff impacts.
- Bloomberg - "Japanese PM Shigeru Ishiba is considering dissolving the lower house of parliament if the opposition submits a no-confidence vote during the current session through late June, local media reported."
- * Reuters - "Japan to promote domestic ownership of JGBs, policy draft shows." (see link)
- Today, the local calendar will see Jibun Bank Composite and Services PMIs.
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JPY: USDJPY - USD/Asia Caps The Move Higher In USD/JPY
May-04 23:18
The overnight range was 143.73 - 145.30, Asia is currently trading around 144.75. USD/ASIA had some significant moves lower in Asia on Friday as trades that were seen as the cleanest expression of tariffs have begun to be unwound. The market will again be focused on this today during our session.
- Kyodo News via BBG - “Finance Minister Katsunobu Kato said at a press conference in Milan, Italy on the 4th, "We are not considering using the sale of U.S. Treasury bonds as a means" in Japan-U.S. negotiations over the Trump administration's tariff policy. He had previously indicated that U.S. Treasury bonds held by Japan could be used as a bargaining chip, but this appears to have been a correction.”
- Yomiuri via BBG - “Japan proposed increasing imports of corn and soybeans in tariff talks with the US.”
- USD/JPY the 145.50/1.4700 area proved to be tough to get through initially. The JPY has benefited from the capitulation in a host of USD/Asia trades, led by USD/TWD.
- Look for some support initially back towards 143.00, but we would probably need another catalyst to test below that again. Which probably leaves a range of 143-147 for the week likely.
- CFTC data shows Asset managers continuing to add to already significant JPY longs, leveraged funds seems to have pared their shorts back a little.
- Data : US ISM Services
Fig 1 : CFTC data
Source: MNI - Market News/Bloomberg
GOLD: Safe Haven Bid Diminishing from Gold for Now
May-04 23:04
- Gold had its worst week since late February as news of potential trade agreements gave markets a boost and pushed some equity bourses back above pre tariff announcement levels.
- Gold was down -2.39% for the week, and opens today in Asia at US$3,239.76.
- From the late April high of $3,423.98, gold is now down over 5% as a combination of profit taking and a redistribution back into equities dictates its fortunes.
- For the first time since early April, gold now sits on the 20-day EMA of $3,243.05. Any break below could see a move lower to the 50-day EMA of $3,119.98
BONDS: NZGBS: Cheaper With US Tsys After Stronger Than Expected US NFP
May-04 23:04
In local morning trade, NZGBs are 4bps cheaper after US tsys sold off on Friday following stronger-than-expected non-farm payrolls data.
- US tsys finished near session lows on Friday after trading richer at the open. Higher-than-expected nonfarm payrolls at 177k (sa, cons 138k), of which private contributed 167k (sa, cons 125k), triggered the early reversal. However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs. -48k two-month revision).
- US stocks are back near four-week highs—pre-"Liberation Day" levels—as optimism about a trade deal improved.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Swap rates are 4-6bps higher with the 2s10s curve steeper.
- RBNZ dated OIS pricing is little changed across meetings. 26bps of easing is priced for May, with a cumulative 77bps by November 2025.
- Today, the local calendar will be empty.
