JGBS: Futures Stronger Overnight, Jobless Rate Higher Than Expected
In post-Tokyo trade, JGB futures closed stronger, +23 compared to settlement levels.
- The jobless Rate and the Job-To-Applicant Ratio for March printed 2.5% and 1.26 versus estimates of 2.4% and 1.25 and priors of 2.4% and 1.24.
- Overnight, US tsy yields finished near session highs with economic data more than to trade-related headlines moving the market.
- Weekly initial and continuing claims printed higher than expected. Initial jobless claims increased to 241k (sa, cons 223k) in the week to Apr 26 after a marginally upwardly revised 223k (initial 222k).
- MNI US Economist - "April's ISM Manufacturing report: the headline reading was slightly better than expected at 48.7 (47.9 expected), only a slight downtick from 49.0 in March. There were surprising improvements in both new orders (47.2 vs 45.0 expected, 45.2 prior) and employment (46.5, vs 44.6 expected and 44.7 prior)."
- Focus now turns to Friday's April employment report.
- The Trump administration reportedly reached out to China, and China's state-owned media noted that Beijing was open to talks.
- Today, the local calendar will also see Monetary Base and Weekly International Investment Flow data alongside an enhanced liquidity auction for OTR 1-5-year JGBs.
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AUSSIE BONDS: Slightly Stronger With US Tsys Ahead Tariff Announcements
ACGBs (YM +1.0 & XM +1.0) are slightly stronger after US tsys finished Tuesday’s session modestly richer as the markets braced for President Trump's announcement of reciprocal tariffs.
- A rising fear is of stagflation and that worry was supported by the ISM and JOLTS data. JOLTS job openings were lower than expected, and quits & layoffs were higher than expected. ISMs mixed with Mfg, new orders and employment lower than expected while prices paid jumped.
- A short while ago, a CNBC reporter posted on X, citing Republican Rep. Kevin Hern, that the tariff rates announced Wednesday will be the highest they will go and countries can then take steps to bring the tariffs down.
- Cash ACGBs are 1bp richer with the AU-US 10-year yield differential +23bps.
- Swap rates are flat.
- The bill strip pricing is +/- 1 across contracts.
- RBA-dated OIS pricing is slightly firmer today. A 25bp rate cut in May is given a 78% probability, with a cumulative 71bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Today, the local calendar will see Building Approvals and a speech from RBA Assistant Governor Kent at the KangaNews Debt Capital Market Summit.
- The AOFM plans to sell A$800mn of the 3.75% 21 May 2034 bond today.
RBNZ: RBNZ’s Conway To Speak On Forecasting On April 15
RBNZ chief economist Conway is scheduled to speak on April 15 at 0930 NZST on how the central bank forecasts the economy. It releases updated staff forecasts in February, May, August and November, which gain a lot of attention, but it is “under no illusion that the economy will always evolve exactly” as it expects and probably won’t. In this appearance, Conway will talk about what data and tools are used, why the RBNZ forecasts and what it intends to convey with its published OCR path. The RBNZ notes that there will not be “any new information” provided on monetary policy or “commentary on latest economic data”. He will appear on Teams and a Q&A session will follow (link available here).
JGB TECHS: (M5) Rebuffs Test on Cycle Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 138.54 - High Mar 31
- PRICE: 137.48 @ 15:41 GMT Apr 01
- SUP 1: 136.67 - 1.0% 10-dma envelope
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs are undergoing a strong bullish reversal, rejected any test of fresh cycle lows for the M5 contract. This defies the bearish momentum studies drawn on the longer-term chart, exposing the 50-dma at 139.01 as a near-term target. To the downside, sights are on 136.57, a Fibonacci projection. 144.48 is the medium-term target on any recovery.
