JGBS: Little Changed, Subdued Session Despite Tokyo Core CPI Miss
JGB futures are weaker and at session lows, -11 compared to the settlement levels.
- Tokyo's core inflation slowed to 3.1% y/y in June from 3.6% in May, but remained above the Bank of Japan's 2% target for the eighth consecutive month. The core-core CPI, which excludes both fresh food and energy and is a key indicator of underlying inflation, also eased to 3.1% y/y in June from 3.3% in May, but stayed above 2% for the fourth straight month.
- (Bloomberg) - "Kato says that there were diverging opinions at the primary dealers' meeting regarding debt buybacks. He added that discussions have taken place about the potential impact of buybacks on the market. Govt not in a situation now where debt buybacks can be implemented, given the need to go through the budgetary process."
- (Bloomberg) -- Japan will take additional action to ease the impact of US tariffs on the auto sector as needed and “without hesitation,” its economy minister says.
- Cash US tsys are 1-2bps cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's gains.
- Cash JGBs are mixed across benchmarks, with yield 2bps lower (40-year) to 1bp higher (10-year).
- Swap rates are little changed.
- On Monday, the local calendar will see Industrial Production and Housing Starts.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURUSD TECHS: Corrective Pullback
- RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1608 High Nov 9 2021
- RES 2: 1.1573 High Apr 21 and the bull trigger
- RES 1: 1.1453 76.4% retracement of the Apr 21 - May 12 bear leg
- PRICE: 1.1303 @ 06:13 BST May 28
- SUP 1: 1.1277 20-day EMA
- SUP 2: 1.1151/1.1065 50-day EMA and a pivot level / Low May 12
- SUP 3: 1.1026 38.2% retracement of the Feb 3 - Apr 21 bull cycle
- SUP 4: 1.0943 Low Apr 10
Trend conditions in EURUSD are bullish and MA studies are in a bull mode position, highlighting a dominant uptrend. The latest pullback is corrective. The Apr 21 - May 12 bear leg also appears to have been a correction. A resumption of gains would open 1.1453, a Fibonacci retracement. Key support is 1.1151, the 50-day EMA. A clear break of the average would highlight a stronger reversal and signal scope for a deeper retracement.
JGBS: Aggressive Bear-Steepener After Poor 40Y Auction
JGB futures are sharply weaker and at Tokyo session lows, -68 compared to settlement levels, after today’s 40-year auction displayed poor demand metrics.
- Demand for today’s 40-year bond issuance was notably weak, with the high yield clearing well above dealer expectations. According to a Bloomberg survey, the market anticipated a yield of 3.085%, while the actual result came in at 3.135%.
- The auction’s cover ratio declined sharply to 2.2114x, down from 2.9203x at the previous issuance and marking the weakest demand since July 2024.
- Given the combination of elevated yield and weak demand metrics, today’s result is likely to be regarded as very poor. In afternoon trading, the 40-year yield is dealing 8bps higher versus pre-auction levels.
- Cash US tsys have modestly bear-steepened in today's Asia-Pac session, with yields flat to 3bps higher.
- Cash JGBs are 2-8bps cheaper, with a steeper curve.
- The swaps curve has bear-steepened, with rates 3-8bps higher. Swap spreads are wider.
- Tomorrow, the local calendar will see International Investment Flow and Consumer Confidence data alongside BoJ Rinban Operations covering 3-25-year JGBs.
FOREX: Asia FX Wrap - USD Keeps Its Bid Tone
The BBDXY has had a range of 1215.25 - 1219.21 in the Asia-Pac session, it is currently trading around 1218. “The Fed’s John Williams said policymakers should focus on anchoring not just long-term price expectations, but “the whole curve” to prevent inflation from becoming persistent or permanent”(BBG). “The ECB’s Philip Lane said inflation will hover around 2% for the rest of the year. The impact of US tariffs on medium-term price pressures will determine monetary policy, he told the FAZ.”(BBG)
- EUR/USD - Asian range 1.1301 - 1.1345, Asia is currently trading 1.1305. EUR has drifted lower for most of the Asian session. It is worth noting that we are heading into the corporate month-end and this could see some USD demand over the next day or 2. Dips back to 1.1200 are expected to be supported.
- GBP/USD - Asian range 1.3473 - 1.3522, Asia is currently dealing around 1.3470. The GBP is struggling to hold above the pivotal 1.3500 area for now, looking for support to return back towards the 13300/3400 area which could be seen if the corporate USD demand materializes.
- USD/CNH - Asian range 7.1868 - 7.1993, the USD/CNY fix printed 7.1894. Asia is currently dealing around 7.1950. Sellers should be found on a bounce back towards the 7.2200 area again. Andreas Steno Larsen on X : The elephant in the room. USDCNH needs to go to 6.80 at least. https://x.com/AndreasSteno/status/1926115935200440525
- Cross asset : SPX -0.10%, Gold $3297, US 10-Year 4.47%, BBDXY 1218, Crude oil $61.19
Data/Events : Fra GDP & PPI, Ger Unemployment, ECB CPI Expectations
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
