JGBS: Futures Lower Post Poor 2yr Auction, Ranges Holding, Tokyo CPI Tomorrow
Aug-28 04:01
JGB futures sit off session highs, last around 137.40, +.05 versus settlement levels. The poor 2yr auction has weighed post the lunch time break, but support still appears evident under 137.40. Recent August lows at 137.22 also remain intact.
- The 2yr debt auction saw a bid to cover ratio of 2.84, the lowest since 2009. The tail from the auction, the gap between the average and lowest accepted prices, was higher at 0.022, versus 0.005 at the prior auction in late July. Note we have the 10yr debt auction on Sep 2, which is next Tuesday.
- This comes as the BoJ maintains a tightening bias, but uncertainty remains around the next move. Earlier remarks from BoJ board member were fairly balanced. "*BOJ'S NAKAGAWA: TO KEEP RAISING RATES IF OUTLOOK IS MET", via BBG.
- "NAKAGAWA: RESULTS OF THE UPCOMING SEPTEMBER TANKAN WILL ALSO BE VERY IMPORTANT IN EXAMINING THE CHANGES ARISING FROM FACTORS SUCH AS PROGRESS IN TRADE POLICY NEGOTIATIONS" (via RTRS).
- In the cash GB space, yields are up from earlier lows, although the back end is still softer. The 30yr was last around 3.20%, still off 3.5bps for the session. The 10yr was near 1.63%. The front end is little changed, the 2yr near 0.86%.
- Note tomorrow we get a number of monthly data prints. Most focus will be on the August CPI print for Tokyo.
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US TSYS: Asia Wrap - Yields Drift Lower In A Quiet Session
Jul-29 04:00
The TYU5 range has been 110-25+ to 110-28+ during the Asia-Pacific session. It last changed hands at 110-27+, up 0-03 from the previous close.
- The US 2-year yield has shifted lower trading around 3.914%, down 0.01 from its close.
- The US 10-year yield has edged lower trading around 4.402%, down 0.01 from its close.
- The 10-year yield has moved back towards its pivot within the wider range 4.10% - 4.65%, decent supply was seen around 4.30/35% first up. A decent bounce was seen off this support but the move has failed to follow through above 4.40% for now. The Data this week should hopefully provide more clarity going forward.
- Nick Timiraos on X: ”Fed officials expect they will need to resume lowering interest rates eventually—they just aren’t ready to do it this week. The questions dividing them center on what evidence they need to see first, and whether waiting for that clarity turns out to be a mistake.”
- “The Fed was united when officials paused cuts this year after tariffs raised fears of renewed inflation. But with tariff-related price hikes proving milder than feared and signs that hiring may be softening, officials are now fractured into three camps over whether to resume cuts.”
- “The focus will be whether Powell offers any hint of a September rate cut in his press conference Wednesday afternoon, and whether in the coming days and weeks his colleagues begin laying the groundwork for a cut at their next gathering.”
- Data/Events: Advanced Goods Trade Balance, FHFA House Price Index, S&P Corelogic, JOLTS, Conf. Board Consumer Confidence, Dallas Fed Services Activity.
JGBS AUCTION: Strong Result For Today’s 2Y Supply
Jul-29 03:42
The 2-year bond auction showed strong results today. The low price printed stronger than the Bloomberg-surveyed forecast of 100.09, while the cover ratio increased to 4.4665x from 3.9028x. The auction tail also narrowed compared to last month.
- The auction occurred with the 2-year yield 10-15bps higher than last month’s issuance level.
- Whereas the 2s/5s yield curve had steepened ~5bps since last month and was around its steepest level since late 2023.
- Amid mixed demand at recent auctions, today’s result will undoubtedly be seen as a positive development.
- Following the auction, the 2-year yield richened by approximately 1bp.
JGBS AUCTION: 2-Year JGB Auction Results
Jul-29 03:37
The Japanese Ministry of Finance (MoF) sells Y1,977.9bn 2-Year JGBs:
- Average Yield: 0.841% (prev. 0.729%)
- Average Price: 100.115 (prev. 99.942)
- High Yield: 0.844% (prev. 0.735%)
- Low price: 100.110 (prev. 99.930)
- % Allotted At High Yield: 35.8202% (prev. 36.5535%)
- Bid/Cover: 4.4665x (prev. 3.9028x)
