JGBS: Little Changed After PPI Data
In Tokyo morning trade, JGB futures have upticked, +4 compared to settlement levels on Friday, after resuming trading following yesterday’s National Foundation Day holiday.
- Japan's PPI comes in a touch softer than expected for m/m, while y/y prints a touch stronger than expected.
- (BBG)Japan’s latest growth figures are set to confirm it slipped to the fourth-largest economy in the world last year, a development that reflects the impact of its feeble currency and ageing demographics. (See link)
- Cash US tsy yields have opened flat to 0.5bp lower across benchmarks in today’s Asia-Pac session.
- Cash JGBs are little changed, with yield movements beyond the 1-year (+1bp) bounded by +/- 0.5bp. The benchmark 10-year yield is 0.1bps higher at 0.727% versus the Nov-Dec rally low of 0.555%.
- Swaps are slightly richer. Swap spreads are slightly tighter.
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JGB TECHS: (H4) Recovers Well Across The Week
- RES 3: 149.53 - High Mar 22 and a key resistance
- RES 2: 148.74 - High Jul 24
- RES 1: 147.65 - High Jan 12
- PRICE: 147.65 @ 16:40 GMT Jan 12
- SUP 1: 144.60 - Low Dec 08
- SUP 2: 143.44 - Low Oct 31 (cont)
- SUP 3: 143.29 - 2.618 proj of the Mar 22 - Apr 18 - May 12 swing
JGBs traded higher to finish the week, adding to those gains Friday. The recent recovery rally and the strength into year-end ‘23 topped initial resistance at 146.52, the Dec 7 high, to mark a bullish development. This opens resistance at 147.27 further out, the Dec 06 high and 148.74, the Jul 24 high. 143.44, the Oct 31 low, marks key support and a medium-term bear trigger. Initial support to watch is at 144.60, the Dec 11 / 8 low.
USDCAD TECHS: Resistance To Watch Is At The 50-Day EMA
- RES 4: 1.3538 50.0% retracement of the Nov 1 - Dec 27 bear leg
- RES 3: 1.3480 200-dma
- RES 2: 1.3457 50-day EMA
- RES 1: 1.3443 High Jan 11
- PRICE: 1.3401 @ 16:51 GMT Jan 12
- SUP 1: 1.3229/3177 Low Jan 2 / Low Dec 27
- SUP 2: 1.3093 Low Jul 14 and key support
- SUP 3: 1.3055 2.0% 10-dma envelope
- SUP 4: 1.2992 50.0% retracement of the 2021 - 2022 bull phase
USDCAD traded higher Thursday, building on recent gains. The broader trend outlook is unchanged and remains bearish and the latest recovery is considered corrective. Resistance to watch is at the 50-day EMA, at 1.3457. A clear break of it would strengthen a bullish theme and open 1.3480, the 200-dma. For bears, a move lower would signal the end of the correction and attention would turn to 1.3177, the Dec 27 low and bear trigger.
US TSYS: Projected Rate Cuts Gain Momentum After Soft PPI Inflation Metrics
- Treasury futures bounce off lows, trading steady to mildly higher after lower than expected PPI Final Demand MoM (-0.1 vs. 0.1% est), YoY (1.0% vs. 1.3% est, prior down-revised to 0.8% from 0.9%). Ex Food and Energy lower than expected as well.
- The most scrutinized areas though will be those that feed into the Fed's preferred measure of inflation: PCE. On this front there is no reason from this report to expect any upside revisions to those expectations than had been imputed by analysts after yesterday's CPI, and perhaps some bias toward downward revisions if anything - especially based on what was reported for the key healthcare services categories.
- March'24 10Y futures tested initial resistance of 112-19 (High Jan 4) to 112-26.5 high before settling back to 112-16.5 last (+5.5). Next technical level to watch 113-12 (High Dec 27 and the bull trigger). Curves bull steepening: 2Y10Y climbed above -20 to -17.936 high (late October 2023 level).
- Short end rates held strong into the close, indicative of higher projected rate cuts through mid-2024: January 2024 cumulative -1.6bp at 5.313%, March 2024 chance of rate cut -77% w/ cumulative of -20.9bp at 5.120%, May 2024 fully pricing in 25bp cut now, cumulative -50.1bp at 4.828%. June 2024 cumulative -80.4bp at 4.525%. Fed terminal at 5.3275% in Jan'24.
- Reminder: The U.S. will observe the Martin Luther King Day public holiday on Monday, January 15. For FI futures: Globex opens normal time Sunday evening at 1800ET but close at 1300ET Monday. Monday Globex re-open at 1800ET precedes normal session hours Tuesday.
