FOREX: JPY Softer as Takaichi Takes Top Spot in Polling
Sep-12 09:35
- JPY weakness stands out early Friday, with USD/JPY rallying through Y147.50 on the back of a Kyodo News report flagging that Thatcherite MP Takaichi is leading opinion polling to replace Ishiba as leader of the LDP and Japanese Prime Minister. Her pro-fiscal spending stance as well as her criticism of BoJ tightening plans have worked against the currency and any rally through yesterday's highs opens resistance into 148.58/149.14, the Sep 8/3 highs.
- The USD trades firmer against all others in G10, benefiting from a phase of equity sales alongside the European open. Weakness in stocks came on no headline or news trigger, although losses are just off yesterday's alltime highs - so may mimic profit-taking rather than any fundamental driver. The USD Index daily chart shows this rally is still contained below 97.944, the 50% retracement for the downleg posted off the early September highs.
- FX volumes are healthy: Z5 EUR futures have posted close to 30k contracts, while JPY futures are seeing notable interest: and already aren't far off meeting the cumulative total volume from Thursday.
- The single currency continues to trade well: the EUR holds yesterday's rally as markets see the first post-decision comments from governing council members. The trend theme in EURUSD remains bullish and the pair is trading closer to its recent highs. Resistance at 1.1743, the Aug 22 high, has recently been cleared reinforcing a bull cycle. This signals scope for 1.1829, the Jul 01 high and bull trigger.
- Focus for the duration of Friday trade shifts to prelim University of Michigan sentiment numbers, at which markets expect 1-year and 5-10-year inflation expectations to moderate to 4.8% and 3.4% respectively. The Fed remain inside their pre-meeting media blackout period, which should keep central bank speak quiet.
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GERMAN AUCTION RESULTS: 2.60% Aug-35 Bund
Aug-13 09:32
| 2.60% Aug-35 Bund | Previous | |
| ISIN | DE000BU2Z056 | |
| Total sold | E5bln | E5bln |
| Allotted | E3.885bln | E3.832bln |
| Avg yield | 2.69% | 2.62% |
| Bid-to-offer | 1.12x | 1.14x |
| Bid-to-cover | 1.44x | 1.49x |
| Avg Price | 99.21 | 99.85 |
| Low Price | 99.20 | 99.84 |
| Pre-auction mid | 99.163 | 99.802 |
| Previous date | 23-Jul-25 |
SOFR OPTIONS: SFRU5 96.00/96.125/96.25 Call Fly Lifted
Aug-13 09:30
SFRU5 96.00/96.125/96.25 call fly paper paid 0.75 on 5,750, goes bid over on the balance of a 10K order on the follow.
EGBS: Bunds Retrace Yesterday Afternoon’s Sell-off; Curve Bull Flattens
Aug-13 09:25
Bund futures are +51 ticks at 129.62, rallying on improved volumes and fully retracing yesterday afternoon’s selloff. Initial resistance is 129.83. Much like yesterday’s price action, there hasn’t been a clear driver to note, with strength coming despite a 0.7% rally in European equities and impending 10-year Bund supply.
- The German curve has bull flattened, with 30-year yields down 5.5bps. 10s30s closed at 55bps yesterday, the steepest since June 2021. The spread is currently back at 54.4bps. Bull flattening on the cash bond curve has translated to outperformance for long end swap spreads & ASWs.
- European equity strength promotes peripheral and semi-core EGB/Bund spread tightening, with the 10-year BTP/Bund spread notably 1.5bps narrower at 77bps (tightest since 2010). A persistent pullback in EUR rates vol since the April tariff-induced volatility episode has been a key driver of BTP spread tightening in the last few months.
- Today’s regional data saw German and Spanish final July HICP confirm flash estimates. The data did not move markets.
