AUSSIE BONDS: Futures Up, AU-US 10yr Spread Higher Past Week, Q2 Capex Today
Aussie bond futures are higher in early Thursday dealings. Both the 3yr (YM) and 10yr (XM) contracts are up 2.5bps, leaving YM at 96.59, while XM was last around 95.675. This follows positive offshore leads from both EU and US markets in Wednesday trade. US Tsys reversed early weakness from Wednesday, with highs in 2s-10s, following German Bund and French Oat contracts. Note for US Tsy futures, the Dec'25 10Y contract tapped 112-15, just below technical resistance at 112-15+, the Aug 5 high and the bull trigger.
- Whilst Australian yields are seeing some of this spillover, the AU-US 10yr differential has still mostly tracked higher. We were last around +7bps, not too far from earlier August highs (+12bps). Outside of softer US yield trends, yesterday's data outcomes in terms of the July CPI beat in Australia has also supported such trends.
- In early dealings today, ACGB benchmark yields are mostly off a little over 2bps. The 3yr is back under 3.40%, while the 10yr is just under 4.30%.
- Private capex is out today and is expected to rise 0.8% q/q after falling 0.1%. This is a component for Q2 GDP, which prints next week. Yesterday, Q2 construction work done rose 3.0%q/q, versus the 1.0% forecast (Q1 was revised down to a -0.3% fall though, originally reported as flat).
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JGB TECHS: (U5) Soft Auction Hinders Tech Picture
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 137.85 @ 15:47 GMT Jul 28
- SUP 1: 137.32 - Low Jul 25
- 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 hold above recent lows, however a bearish theme remains intact following the reversal posted off the mid-June highs and weak demand for JGBs at auction. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, the first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US: Trade Truce Extension With China Likely, Trump Considering Trade Deals
Comments from US Commerce Secretary Lutnick crossed the wires a short while ago (via BBG). These were from an interview Lutnick gave with Fox News. The focus point was on trade deals/tariffs.
- Lutnick stated that a trade truce extension with China was likely, but that US President Trump would decide. Lutnick stated that Trump is looking at a few trade deals this week, before deciding on tariff rates for all other countries he added.
- Lutnick also stated that South Korea officials flew to Scotland to meet with him and USTR chief Jamieson Greer to push forward trade talks.
- This comes ahead of an expected meeting between South Korea's Finance Minster Koo Yun-cheol and US Tsy Secretary Bessent, scheduled for this Thursday (US Time). This one day before the Aug 1 deadline.
JPY: USD/JPY - Marches Higher, Eyes July Highs Just Above 149.00
The overnight range was 147.79 - 148.58, Asia is currently trading around 148.50. USD/JPY continued to build on its momentum higher as the USD shorts reduce risk heading into an important week for risk. Corporate month-end today will add to the headwinds for the USD shorts. A move back above the highs for July would turn the focus towards the pivotal 151.00/152.00 area.
- First Squawk on X: "Japan’s Isuzu Motors is reportedly considering relocating small-truck production destined for the U.S. market from Japan to the United States, according to Kyodo News.”
- Kyodo News via BBG - “Japan's long-term interest rates fell due to speculation that the Bank of Japan will refrain from further interest rate hikes at its monetary policy meeting to be held on the 30th and 31st. Selling of the yen and buying of the dollar was dominant, due to the widening interest rate gap between Japan and the United States.”
- Options : Close significant option expiries for NY cut, based on DTCC data: 146.65($823m).Upcoming Close Strikes : 149.00($1.16b July 30), 147.00($1.52b Aug 1), 146.00($1.43b Aug 1) - BBG.
- CFTC data shows Asset managers surprisingly added slightly to their JPY longs +72326( Last +71610), while leveraged funds have slightly reduced their newly built short JPY position -11571(Last -12606).
- Data/Event : Japan 2yr Bond Sale
Fig 1 : USD/JPY Spot 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
