JAPAN: LDP Considering 'Full Spec' Leadership Election On October 4
Japan’s ruling Liberal Democratic Party is considering a ‘full spec’ leadership election on Oct. 4 to elevate a successor to outgoing PM Shigeru Ishiba. The Ishiba government will convene a special parliamentary session to formalise the new government within a few days of the vote.
- Bloomberg notes the election format would give "each of the 295 LDP parliamentary lawmakers one vote each and allocate an equal number of votes to party members. The LDP had 1.03 million members in 2024. That leaves the contenders fighting over 590 ballots."
- Nikkei notes, “If no candidate is able to win a majority, a [FPTP] run-off will be held among the top two candidates... If different candidates are nominated by the two houses, the decision of the lower house prevails.” As the LDP does not control a majority in parliament, there is a remote possibility that a minority coalition could elect a non-LDP candidate via majority vote.
- Polymarket gives pro-reform Agriculture Minister Shinjiro Koizumi a slight edge over conservative Internal Affairs Minister Sanae Takaichi. A third, lower-profile, frontrunning candidate, Chief Cabinet Secretary Yoshimasa Hayashi, receded this morning.
- Nikkei notes that two short-lived PMs have raised concerns of a reversion to 'revolving-door prime ministers', suggesting that political stability will be a key feature of the campaign. An expert told Nikkei that a snap general election in the short term is unlikely, with the new leader likely to hold at least one parliamentary session this autumn before calling an election -- next year at the earliest.
Figure 1: Next Japanese Prime Minister
Source: Polymarket
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
