JGBS: Market Cheapens After 30Y Auction, BoJ Takada Signals Hike Pause
JGB futures are weaker, -16 compared to settlement levels, after today’s 30-year auction.
- The 30-year JGB auction delivered mixed results. The low price fell short of dealer expectations of 99.75, per the Bloomberg survey. However, the cover ratio rose to 3.5796x from 2.9215x. On the other hand, the auction tail shortened significantly to 0.31 from 0.49, indicating an improvement in bidding strength.
- Kyodo news via BBG - "On the 3rd, Bank of Japan Board member Hajime Takada spoke in Tsu City, saying, "We are currently in a period where we should pause on raising interest rates," and expressed the view that it would be best to maintain the policy interest rate for the time being. He cited the economic uncertainty caused by the high tariff policy of the Trump administration as the reason."
- Cash US tsys are 1-2bps richer in today's Asia-Pac session ahead of today's heavy US data calendar that includes June NFP. US markets are closed on Friday for the 4th of July Holiday.
- Cash JGBs are flat to 3bps cheaper across benchmarks, with the curve steeper. The benchmark 30-year yield is 2.5bps higher at 2.918%.
- The swaps curve has twist-steepened, with rates 1bp lower to 2bps higher. Swap spreads are mixed.
- Tomorrow, the local calendar will see Household Spending data.
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EURUSD TECHS: Bull Cycle Still In Play
- RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - Mar 27 price swing
- RES 3: 1.1608 High Nov 9 2021
- RES 2: 1.1573 High Apr 21 and the bull trigger
- RES 1: 1.1455 Intraday high
- PRICE: 1.1423 @ 06:10 BST Jun 3
- SUP 1: 1.1307 20-day EMA
- SUP 2: 1.1182/1.1065 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
A bullish theme in EURUSD remains intact and Monday’s gains and fresh short-term cycle high reinforce current conditions. The breach of 1.1419, the May 26 high, confirms a resumption of the trend and opens 1.1573, the Apr 21 high and bull trigger. Support to watch lies at 1.1182, the 50-day EMA. A clear break of this average would undermine the bull theme and signal scope for a deeper retracement. This would open 1.1065, the May 12 low.
JGBS: 10Y Auction Result Sparks Rally, BoJ Ueda Speech Later Today
JGB futures are stronger, +10 compared to settlement levels, after gapping higher following a strong 10-year auction.
- The 10-year JGB auction delivered a low price above expectations, according to the Bloomberg dealer poll. Moreover, the cover ratio increased to 3.6627x from 2.5440x, and the tail shortened to 0.01, the shortest since March 2023, from 0.18.
- BoJ Governor Ueda, speaking in parliament, emphasised that trade uncertainties remain extremely high and are unlikely to ease even after tariff issues are resolved. He noted that the BoJ's baseline economic scenario could change significantly due to external conditions.
- He also said the BoJ will review its bond tapering plans at the next policy meeting on June 17, taking into account feedback from bond market participants.
- Note as well Governor Ueda will speak later today at 4:50pm local time.
- Cash US tsys are ~1bp richer in today's Asia-Pac session after yesterday's sell-off.
- Cash JGBs are 1bp cheaper to 2bps richer across benchmarks, with the belly leading. The benchmark 10-year yield is 2.3bps lower on the day at 1.490%.
- Swap rates are flat to 1bp lower.
- Tomorrow, the local calendar will see Jibun Bank Composite and Services PMIs.
BUND TECHS: (M5) Outlook Remains Bullish
- RES 4: 132.56 High Feb 28 and a key resistance
- RES 3: 132.03 High Apr 7 and the bull trigger
- RES 2: 131.72 High May 7
- RES 1: 131.44 High May 30
- PRICE: 131.35 @ 05:46 BST Jun 3
- SUP 1: 130.39 May 29 low
- SUP 2: 129.49/13 Low May 22 / 15 and key short-term support
- SUP 3: 129.02 Low Apr 10
- SUP 4: 128.60 Low Apr 9 and a key support
A bullish theme in Bund futures remains intact and the contract is trading at its recent highs. The latest recovery suggests the move down between Apr 22 - May 15, has been a correction. A continuation higher would strengthen the reversal and signal scope for a climb towards 132.03, the Apr 7 high. Key short-term support to watch is 129.13, the May 15 low. First support lies at 130.39, the May 29 low.
