JAPAN DATA: Local Appetite For Offshore Bonds Waned Into End May, Equities Sold
Japan local investors were net sellers of both offshore bonds and stocks last week. This was the final week of May, with modest net selling of offshore bonds. Still for the month, we had healthy net buying (with ¥4.2trln in net purchases for the last 5 weeks). Global bond returns were close to flat for the month of May. We saw larger selling of offshore equities. This marked the third straight week of outflows, although we are still net positive for 2025 to date.
- In terms of inflows into Japan bonds, there was a notable step up by offshore investors in terms of purchases. The ¥1.165Trln in net inflows was the strongest weekly pace since mid April. This comes at a time when we have seen faltering appetite at longer dated JGB auctions. The earlier 10yr auction this week saw firm demand. Later today we have a 30yr auction.
- Offshore investors continued to buy local stocks, which marked the 9th straight week of inflows into this space.
Table 1: Japan Weekly Investment Flows
| Billion Yen | Week ending May 30 | Prior Week |
| Foreign Buying Japan Stocks | 336.1 | 309.1 |
| Foreign Buying Japan Bonds | 1165.4 | -332.8 |
| Japan Buying Foreign Bonds | -118.0 | 100.4 |
| Japan Buying Foreign Stocks | -1144.1 | -524.7 |
Source: MNI - Market News/Bloomberg
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FOREX: AUD Crosses - AUD Holding Onto Its Gains
After initially trying higher on a better than expected ISM services print risk could not hold onto these gains and closed poorly. (Bloomberg) -- Macquarie Group Ltd. Chief Executive Officer Shemara Wikramanayake said Australia’s economy is looking resilient and is set up well to withstand the shocks emanating from US trade policy. “The economy is coming into this really quite resilient,” she said at the Macquarie Australia Conference in Sydney on Tuesday. “Capital is coming into this market.” “Australia is once again going to prove one of the more resilient economies in the world,” Wikramanayake said.
- EUR/AUD - Overnight range 1.7464 - 1.7531. Asia is trading around 1.7505. The first support around 1.7600 was broken on Friday as the AUD outperforms. Sellers should remerge now back towards 1.77/78, with upward momentum broken this pair looks a little directionless.
- GBP/AUD - Overnight range 2.0482 - 2.0563. Asia is trading around 2.0570. A good break lower on Friday, a reduction in some longs potentially targets the 2.02/03 area. A bounce back towards 2.0800 should now see sellers first up.
- AUD/JPY - Overnight range 92.94 - 93.47, Asia is trading around 92.85. AUD/JPY has had a powerful extension as shorts are pared back. Price is now moving towards testing the Weekly resistance seen between 94.00/96.00 sellers should remerge here.
- AUD/NZD - Overnight range 1.0819 - 1.0854, the cross is dealing in Asia around 1.0840. Sellers could be expected again around these levels, a move back above 1.0900 would negate the bearish trend.
Fig 1: AUD/JPY spot Daily Chart
Source: MNI - Market News/Bloomberg
US TSYS: Cash Not Open In Asia
TYM5 is trading 111-02, unchanged from its close.
- The US 10-year yield closed in the US around 4.3433%, it's a holiday in Japan today.
- Bloomberg- “Global real money is buying Treasuries following the recent cheapening. While there is more supply to come, taking yields higher in the interim, by the end of the week real money buys should be rewarded.”
- “After $58 billion in 3-year Treasuries stopped through, logic says that sets up for a similar result on the $42 billion reopening sale Tuesday as well as the $25 billion 30-year reopened bond on Thursday. And with ~$14 billion in IG bonds pricing with ease, corporate treasurers are likely to issue even more Tuesday. Rate locks and position adjusting linked to the supply will likely take yields higher in the days ahead.”
- The 10-year Yield range seems to be 4.10% - 4.45%, price has moved above the 4.30% pivot and with more supply to come this week a push back to 4.45% is possible before the buyers come in.
- Data: US Trade Balance
OIL: Crude Recovers Some Losses But Excess Supply To Keep Prices Low
Oil prices fell sharply following OPEC’s decision to increase output by a second larger-than-expected +400kbd from June with the risk of more but they recovered some of their losses during European trading. Excess supply in 2025 was already expected last year and US trade policy and increased OPEC production have added to concerns over the size of the surplus. OPEC has changed its policy to increase market share and impact overproducing members with lower prices.
- WTI is down 1.8% to $57.23/bbl after falling to $55.30 close to the start of the session. It reached $57.70 before levelling off. Monday’s move confirmed the medium-term bearish trend in WTI but it held above the bear trigger at $54.67. It is currently a bit lower at $57.14.
- Brent finished down 1.7% to $60.25/bbl after starting the day at $58.50, still above the bear trigger at $58.00. It reached a high of $60.82. Initial resistance is at $64.91, 20-day EMA. Trade volumes were thinner from the UK holiday.
- Next week US President Trump is scheduled to travel to the Middle East including Saudi Arabia, UAE and Qatar.
- Hopes that trade deals with the US will be announced soon, maybe even by the end of the week according to Trump, may provide a floor to oil prices which have been very concerned about the impact of US tariffs on global energy demand.
