JGBS: Market Strengthens After 20Y Auction, Japan's Exports Hit By Tariffs

• RES 4: 117.710 High Aug 5 and a key resistance    
• RES 3: 117.640 High Aug 7 
• RES 2: 117.546 50-day EMA 
• RES 1: 117.405 20-day EMA
• PRICE: 117.030 @ 05:42 BST Aug 18
• SUP 1: 116.950 Low Aug 15   
• SUP 2: 116.840 1.00 proj of the Jun 13 - Jul 11 - 22 price swing  
• SUP 3: 116.800 Low Mar 17 (cont) 
• SUP 4: 116.637 76.4% retracement of the Mar 6 - Apr 7 bull leg (cont)

A strong sell-off in Bobl futures on Friday highlights a bearish threat, once again. The contract is trading at the bottom-end of the recent range and has pierced support at 116.970, the Jul 25 low and a bear trigger. A clear breach of this level would set the scene for an extension towards 116.849, a Fibonacci projection. Key short-term resistance to watch is 117.546, the 50-day EMA.

JGB futures are weaker, -15 compared to settlement levels

• Japan tertiary industry index rose 0.5% in June from a month earlier, compared to economists’ estimate at +0.2%.
• Cash US tsys are 1-2bps richer in today's Asia-Pac session after Friday's bear-steepener. 
• (Bloomberg) "Japanese bonds are in for a rough week with Tuesday's 20-year debt sale looming as the next curve disruptor. It's a tricky tenor, neither a benchmark, nor an ultra-long. The duration is one of the least popular for investors with a history of sloppy outcomes which scatter the JGB playing field. Secondary JGB levels don't help either. Buyers at the seven previous auctions this year are underwater on a mark-to-market basis. Even sharply reducing the size of the July debt sale barely improved its overall metrics. Which augurs badly for this week when there is also Japanese CPI data on Friday that is unlikely to knock the BOJ off its rate hike path."
• Cash JGBs are flat to 3bps cheaper across benchmarks. The benchmark 10-year yield is 0.5bp higher at 1.577% versus the cycle high of 1.616%.
• Swap rates are flat to 1bp lower, with swap spreads tighter.
• Tomorrow, the local calendar will see 20-year supply.