JGBS: Futures Pare Overnight Gains
JGB futures initially spiked through their overnight high as Tokyo reacted to the impulse derived from the softer than expected U.S. JOLTS data released Tuesday, before paring the bulk of those gains to sit +9 ahead of the close. Cash JGBs run 1.5bp richer to 0.5bp cheaper, with the 7- to 10-Year zone outperforming on the bid in futures. Swap rates are a touch lower on the day, fading from session extremes alongside JGBs.
- Subdued to average offer/cover ratios in today’s BoJ Rinban operations (covering 1- to 5- & 10- to 25-Year JGBs) and U.S. Tsys finding a bit of an intraday base (within tight ranges) helped stabilise JGBs in the Tokyo afternoon, with futures off worst levels. Note that today’s Rinban was the first round of purchases after the BoJ’s well-documented tweak to the Q2 purchase bands, with 10- to 25-Year paper receiving a Y50bn uptick in purchases today (after the reduction seen in purchase sizes covering that bucket during March)
- LDP Secretary General Motegi noted that Japan doesn’t intend to lift taxes or issue debt to facilitate PM Kishida’s measures aimed at supporting families.
- On the corporate issuance side Berkshire Hathaway has mandated banks for JPY issuance, with the deal reportedly set to follow in “the near future,” as Warren Buffett’s company returns to the JPY debt market.
- Weekly international security flow data from the MoF and 30-Year JGB supply headline tomorrow.
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BUND TECHS: (M3) Downtrend Remains Intact
- RES 4: 134.00 Round number resistance
- RES 3: 133.28 20-day EMA
- RES 2: 132.63 High Feb 28
- RES 1: 132.01 High Mar 1
- PRICE: 131.38 @ 05:12 GMT Mar 6
- SUP 1: 130.35 Low Mar 2 and the bear trigger
- SUP 2: 130.00 Psychological round number
- SUP 3: 129.26 2.382 proj of the Jan 18 - Jan 30 - Feb 2 price swing
- SUP 4: 128.79 2.50 proj of the Jan 18 - Jan 30 - Feb 2 price swing
Bund futures gains are considered corrective and a short-term recovery would allow the oversold trend condition to unwind. Last week’s move down once again confirmed a resumption of the primary downtrend and maintains the bearish price sequence of lower lows and lower highs. The focus is on the 130.00 handle next. Initial firm resistance is seen at 133.28, the 20-day EMA. The bear trigger is 130.35, last week’s low.
US TSYS: Off Best Levels, Light Bull Steepening Seen
Nothing to really note as Tsys pull back from best levels, with TYM3 last +0-05+ at 116-27+, 0-03 off best levels, while cash Tsys run little changed to 1.5bp richer as the curve bull steepens. There hasn’t been much in the way of meaningful headlines to drive the space over the last few hours, leaving flow and positioning adjustments at the fore, as opposed to fresh fundamental drivers.
EQUITIES: Gains Outside of China/HK
Outside of China and Hong Kong, most regional equities are tracking higher, following the strong lead from US markets during Friday's session at the end of last week. US futures started weaker today, but have recovered firmly, with Eminis breaching the 4060 level, before retracing somewhat. The short term technicals are better with the active eminis contract now trading above its 20 and 50-day EMA.
- China/HK stocks have been left somewhat disappointed by the 'around 5%' growth target announced at yesterday's NPC for 2023. It implies less stimulus measures, which the equity market has taken as a negative. The CSI 300 is off by around 0.55%, with property stocks weighing, as the NPC didn't suggest any dramatic shifts in terms of housing policy.
- The HSI is around flat, which is away from worst levels, but is underperforming better trends elsewhere in the region. The prospect of additional curbs on US investment is China is also acting as a headwind.
- Elsewhere the mood is more positive. The Nikkei is at +1.20%, while the Kospi and Taiex are both around +1% higher as well.
- Indian shares are also rallying, up a further 1% as Adani related stocks rose in early trade.
- On the Singapore bourse is down in SEA.
