JGBS: Futures Weaken In Afternoon Session, Natl CPI Tomorrow

ACGBs (YM -0.5 & XM +2.5) are slightly mixed.

• At its July meeting, the RBA Board decided that publishing “an unattributed record of votes” would strengthen its communication. The majority of members decided the best decision was to keep rates unchanged and wait for more information to be confident that inflation will “sustainably” return to the band midpoint and to be consistent with its previously communicated desire to be gradual and cautious, which was factored into the May forecasts.
• Cash US tsys are slightly richer in today's Asia-Pac session.
• Cash ACGBs are showing a modest twist-flattening with the AU-US 10-year yield differential at -7bps.
• The bills strip has bear-flattened, with pricing -1 to -3.
• RBA-dated OIS pricing is slightly softer across meetings today. A 25bp rate cut in August is given a 100% probability, with a cumulative 65bps of easing priced by year-end.
• Tomorrow, the local calendar will see the Westpac Leading Index.
• The AOFM announced the issue by syndication of a new 4.25% 21 October 2036 Treasury Bond. The issue will be of a benchmark size. Initial price guidance for the issue is a spread of 3.5 to 6.5 basis points to the implied bid yield for the primary ten-year Treasury Bond futures contract. The issue is expected to be priced tomorrow. 

The BBDXY has had a range of 1200.18 - 1201.47 in the Asia-Pac session, it is currently trading around 1201, +0.06%.  The USD again fell very easily overnight, aided by the move lower in US yields. The market is much more comfortable selling USD’s, while the BBDXY trades below 1220 rallies will continue to find supply. “Scott Bessent called for a review of the Fed’s decision to renovate its headquarters. The central bank should conduct an internal examination of its non-monetary policy operations given the “significant mission creep,” he posted on X.” - BBG

• EUR/USD -  Asian range 1.1683 - 1.1696, Asia is currently trading 1.1690. The pair bounced off its first support around the 1.1600 area. The price still looks a little stretched in the short term and is vulnerable to any correction in the USD, first support around 1.1550/1600 then more importantly the 1.1450 area.
• GBP/USD - Asian range 1.3477 - 1.3494, Asia is currently dealing around 1.3480. The support around 1.3350/1.3400 has proved to be solid first up. Bounces back towards 1.3500/1.3550 should now see offers initially. A sustained move below 1.3350 would signal a deeper correction could be underway, until then market will continue to accumulate longs.
• USD/CNH - Asian range 7.1700 - 7.1749, the USD/CNY fix printed 7.1460, Asia is currently dealing around 7.1720. Sellers should be around on bounces while price holds below the 7.2000 area and the PBOC manages the fix lower. Above 7.2000 and we could see a test of the USD Shorts.
• Cross asset : SPX -0.05%, Gold $3389, US 10-Year 4.368%, BBDXY 1201, Crude oil $66.51
• Data/Events : France Retail Sales

Fig 1: GBP/USD Spot Hourly Chart

Source: MNI - Market News/Bloomberg Finance L.P

Asian equity markets are mixed in the first part of Tuesday trade. Further gains in Hong Kong and China markets are a positive, but other major indices are down at this stage, including returning Japan markets. US equity futures are down modestly, while EU futures are down by more, Euro Stoxx futures off by around 0.50%.

• Japan markets have returned from the long weekend and following the weekend election result where the LDP coalition lost its majority. At this stage, the Topix is down 0.40%, while the NKY 225 is off by around 0.55%. Onshore bond yields are mixed, slightly firmer at the back end of the curve. Tomorrow, we have a 40yr bond auction, which will test market sentiment post the election outcome. Japan and US officials also spoke for around 2 hours on Monday as the two-sides try to reach a trade deal before the Aug 1 deadline.
• South Korea and Taiwan markets are faltering. The Kospi is down 1.5%, last near 3160, once again struggling to hold above the 3200 level. The Taiex is down around 1%, with the index also moving off recent highs. Recent sessions have delivered less positive offshore impetus, particularly in the tech space.
• China and Hong Kong markets are up modestly, the HSI above 25000 and the CSI 300 around 4100. Onshore media noted the strong buying of local China market ETFs from the sovereign wealth fund through Q2 of this year.
• In Australia, the ASX 200 is down modestly, while in SEA most markets are weaker as well, but this follows strong gains recently, particularly for the likes of Thailand and Indonesia.