JGBS: Market Reverses Direction, US Tsys & Poor 10Y Auction Weigh
JGB futures are weaker, -17 compared to the settlement levels, after reversing direction following today’s poor 10-year auction.
- The 10-year JGB auction delivered weak results, with the low price falling short of expectations, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 2.5440x from 3.1475x, and the tail lengthened to 0.18 from 0.11.
- This performance came with an outright yield 10-15bps lower than last month and approximately 30bps below the recent cyclical high of 1.596% reached in late March, just before President Trump's announcement on reciprocal tariffs.
- “Governor Ueda says the bank can't ignore the potential downside risks to prices stemming from US tariff measures.” (per BBG).
- Cash US tsys are ~3bps cheaper in today's Asia-Pac session after headlines from the NYT that the first trade deal announcement from the US administration would be with the UK (slated for 10am US time on Thursday).
- Cash JGBs are mixed across benchmarks, with the 20-30-year zone as the outperformer (~1bp richer). The benchmark 10-year yield is 1.4bps higher at 1.321% after being as low as 1.2780 pre-auction.
- Swap rates are flat to 2bps higher. Swap spreads are wider.
- Tomorrow, the local calendar will see Real & Labor Cash Earnings, Household Spending and Coincident/Leading Index data.
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FOREX: Consolidation Sees The USD Give Back Some Gains
China is signaling it is not backing down and prepared for a prolonged standoff. The communist Party’s official newspaper has declared Beijing is no longer “clinging to illusions” of striking a deal. Asian equities have found some support though in sympathy with the bounce in the US and a statement that the “PBOC to provide Re-Lending support for Huijin when needed”. In other words, the Chinese will smooth the stock market and not allow it to collapse.
- EUR/USD - 1.0905 - 1.0980, approaching the London session near the Asian highs around 1.0980 as risk continues to bounce.
- GBP/USD - 1.2721 - 1.2792, trading at the day's highs going into the London session.
- AUD/USD - 0.5978 - 0.6062, a good bounce off its lows as price rejects the first foray below 0.6000. Look for the 0.6150/0.6250 area to find good resistance.
- AUD/JPY - 88.25 - 89.44, pressing this highs going into the London session, an ugly rejection on the Daily chart means there might be some more reversion back to the mean, but when risk takes another leg lower expect sellers to return. The 91.50/93.00 area is good resistance.
- USD/CNH - 7.3366 - 7.3651, trading near the day's lows going into the London session. The PBOC fixing was above the closely watched 7.2000 for the time since 2023. The market is taking this as a sign of them being open to let the peg go, and continues to see a higher USD/CNH as the cleanest way to play the tariffs. Asia though could once again not get above the key 7.36/37 area. A break above 7.38/40 would be significant for USD/CNH and broader the USD backstory.
- USD/JPY - 147.25 - 148.12. USD/JPY has seen a significant bounce and is now approaching a key sell zone between 148 - 150.
- Cross asset : SP +1.1%, Gold 3000.00, US 10yr 4.1450%, BBDXY 1266, Brent 65.11
- Key US data this week will be the US CPI April 10th.
USDCNH
Source: MNI - Market News/Bloomberg
GBPUSD TECHS: Impulsive Corrective Pullback
- RES 4: 1.3274 High Oct 3 ‘24
- RES 3: 1.3207 High Apr 3 and the bull trigger
- RES 2: 1.3017 61.8% retracement of the Apr 3 - 7 sell-off
- RES 1: 1.2899 38.2% retracement of the Apr 3 - 7 sell-off
- PRICE: 1.2776 @ 06:09 BST Apr 8
- SUP 1: 1.2709 Low Apr 7
- SUP 2: 1.2669 2.0% 10-dma envelope
- SUP 3: 1.2654 50.0% retracement of the Jan 13 - Apr 3 bull cycle
- SUP 4: 1.2559 Low Feb 28
GBPUSD traded sharply lower Monday, extending the retracement from the Apr 3 high. For now, the sell-off appears corrective. Price has traded below the 50-day EMA - a concern for bulls - however, MA studies are in a bull mode position and this highlights a dominant uptrend. A recovery would open 1.2899 and 1.3017, Fibonacci retracement points. A move through Monday's 1.2709 low, would instead signal scope for a deeper retracement.
US TSYS: Cash Bonds Partially Reverse Yesterday’s Heavy Session
TYM5 is 112-04+, +0-03 from closing levels in today's Asia-Pac session.
- Cash US tsys are showing a bull-steepener, with benchmark yields 2-5bps lower, in today's Asia-Pac session after yesterday's extremely heavy session.
- “Even 'safe haven' trades like Treasurys are falling on Trump's tariffs. What does that tell investors?” (DJ see BBG link)
- “The recent US bond market selloff may appear linked to an increase in risk appetite, however simultaneous high yield US credit spread widening suggests otherwise, according to Citigroup. Investors may instead opt for alternative G-10 sovereign debt, such as that from Europe and Australia.” (per BBG)
- Economic data remains light ahead of key releases later this week. Markets are looking ahead to Wednesday's release of the March FOMC minutes, followed by CPI data on Thursday and PPI on Friday.
