BOJ: JPY A Touch Softer As BoJ Governor Ueda Speaks

• "I'll give you three things that are very much on my mind in terms of priorities for the surveillance internationally and domestically. One is the much the much greater leverage in the non bank sector, the huge change in intermediation markets and take on bond markets. Now we've had some interesting tests of this in the last couple of few months, so we've a lot to learn from that. What have we learned? What have we learned about resilience, fragility?"
• "The second one is, I think we do need to lift the lid on the private asset, private equity, private credit world, not because I'm saying there's a sort of there's a massive problem staring us in the face. It's too opaque at the moment. So understanding the lie of the land, the vulnerability, vulnerabilities the strengths."
• "The third one is the is it obviously, the big shift now towards, you know the potential growth of stable coins and what the implications say you know if you have to push me to late list tree there they are."

The Spanish June manufacturing PMI rose to 51.4, above the 50.5 consensus and prior for the highest since December 2024. There are quite a few interesting details in the release. First, there are some signs of US tariffs and related uncertainty having an impact on actual orders and planned purchasing activity. Meanwhile, the strong EUR was reported to have weighed on some input prices. 

Key notes from the release:

• "The improvement in the PMI was principally underpinned by a solid rise in production. Growth was the strongest since last December and reflected (in part) higher new order volumes"..."However, the rate of growth was marginal, weighed down by another fall in new export business. Panellists continued to report tariff-related uncertainty had negatively impacted foreign sales"
• "There remained some ambiguity in the outlook especially around US trade policy and its impact on the global economy. This meant that firms overall took a circumspect approach to their purchasing activity, often preferring to utilise their existing input inventories in production wherever possible"
• "On the price front, a marginal decline in input costs was recorded in June. This was linked by firms to downward pressure on product prices given soft market demand. A strong euro was also reported to have reduced the price of US dollar denominated inputs".
• "Given the fall in input prices, and partly reflective of a business environment characterised by uncertain client demand and competitive market conditions, Spain’s manufacturers chose to reduce their own charges again in June."
• "Firms added to their staffing levels in June, extending a current period of expansion that began in March"

Gilts look to the overnight rally in peers at the open, with futures trading though the highs seen over the past couple of sessions.

• Contract prints 93.48 last, +45 on the day.
• The bullish technical theme in the contract remains intact, initial resistance located at the June 25 high (93.57), while initial support remains at the 20-day EMA (92.70).
• Yields 3-5bp lower across the curve, flattening seen.
• BoE Governor Bailey is currently speaking. When asked about QT, he noted that the Bank will look at implications of the steepening of the curve when thinking about year ahead sales. On the steepening on the curve specifically, he says there's been a high level of uncertainty in the world economy, while highlighting the UK’s longer WAM vs. peers.
• Final manufacturing PMI data is due this morning.
• Elsewhere, Bailey will appear again, this time on a panel alongside Fed’s Powell, ECB’s Lagarde, BoJ’s Ueda and BoK’s Rhee (from 14:30 London). We heard from Bailey twice last week, and he didn’t really say anything to guide future policy in either appearance. We expect more of the same.
• On the supply front, the DMO will come to market with GBP2.0bln of the 1.50% Jul-53 green gilt this morning.