MNI US MARKETS ANALYSIS - Pension Fund Comments Boost JPY/JGBs

Highlights:

• JGBs and JPY rally following Finance Minister comments on pension funds investment.
• Oil prices consolidate pullback as peace talks said to continue.
• Canada June employment data headlines Friday calendar.

US TSYS: Holding Reversal Of US-Iran Escalation Induced Losses

Treasuries are mildly firmer, currently broadly consolidating yesterday’s rally on lower crude oil futures although with 5s through to 30s extending those gains earlier in the overnight session. The US says Iran talks are to continue despite Hormuz strikes. Today’s particularly light calendar sees added attention on the Fed’s Monetary Policy Report which should be published today ahead of Fed Chair Warsh’s congressional testimonies next week. US CPI on Tuesday also starts to loom large. 

• Cash yields are 1-1.8bp lower with the front end slightly lagging declines.
• TYU6 trades at 109-09+ (+01) on light cumulative volumes of 240k.
• It’s earlier high of 109-12 saw a full reversal of losses seen since Tuesday’s revocation of waiver of Iranian oil supply – see our STIR comment for a comparison here with stickier European rates where energy sensitivity remains higher.
• Resistance is seen at 109-25+ (Jul 2 & 6 high) but a bear cycle is still in play despite a bounce. Latest support is seen at 108-25 (Jun 8 low) after touching 108-25+ on Wednesday following clearance of a previous notable support level.
• Fed: Monetary Policy Report (potentially 1100ET)
• Politics: Trump in Swearing-In Ceremony for Special Envoy for American Landowners (1500ET)

STIR: US Front Rates Consolidate Recovery of Mid-Week Losses, Fed MPR Today

• US rates are on balance little changed overnight as they consolidate yesterday’s rally in tandem with lower crude oil future.
• Front rates have broadly reversed the previous drop on Tuesday when the Iranian oil waiver was revoked via additional losses seen Wednesday when President Trump said the Iran ceasefire is over. That’s in contrast to European rates where recoveries have been slower.
• There are no notable US data releases today, with scope for some spillover from the Canadian jobs report. However, the Fed’s semi-annual Monetary Policy Report should be published today (recent examples published 1100ET) ahead of Fed Chair Warsh’s Congress testimonies next week (House on Tue, Senate on Wed).
• FF cumulative hikes from 3.62% effective: 6bp Jul, 19bp Sep, 24bp Oct, 34bp Dec building to 42.5bp with Mar and Jun 2027.
• The SOFR peak implied yield of 4.09% (H7) continues to hold towards the middle of the rough range of 4.00-4.20% for recent weeks. 

CANADA DATA: Employment Gains To Slow In June Labour Force Survey

Canada's Labour Force Survey is expected to show continued but substantially slower job gains in June after a 17-month high in May, with consensus for a 10k employment increase (87.8k prior). The unemployment rate is seen steady at 6.6%.

• May's extraordinarily strong report, in which job gains beat expectations for the first time so far in 2026, assuaged fears of more substantial softening in the Canadian economy than had been expected in the first half of the year. A gain in line with consensus in June would reduce net job losses in 2026 so far to 15k, having been down a cumulative 112k through April. June saw a 154k rise in full-time employment (most since Feb 2022) with the best rise in goods-producing sectors in 3 years (39k) with Services seeing the best month (49k) since October 2025.
• The steady unemployment rate (6.56% unrounded in May was a 4-month low) amid soft job growth is seen to be accompanied by a steady participation rate (65.0% in both April and May).
• Proxy data were mixed in June. The Ivey PMI's employment gauge softened to a still-elevated 53.6 from 54.3 and the Canadian Federation of Independent Business (CFIB)'s net staffing intentions turned negative for the first time this year; but the S&P Global Composite PMI report noted "employment numbers rose slightly overall and for the second time in the past three months". Additionally, the Q2 BOC Business Outlook Survey (BOS)  showed employment intentions were weaker than the historical average, with some slack in evidence as the overall intensity of labor shortages abated.
• June is a strong month for hiring on a non-seasonally-adjusted basis though the seasonal factors for the month have looked fairly middling as it goes in recent years. There will also be some attention on World Cup-related gains in the Services categories (eg Accommodation) though this effect appeared to be subdued at best in the US's June nonfarm payrolls.
• The strong May figure means it's sensible to expect some mean reversion. But we caution that the extreme volatility in recent readings (Jan: -25k, Feb -84k, Mar: +14k, Apr: -18k) makes it difficult to draw firm conclusions from any single report.
• And the bigger picture is that chronic labor supply issues persist amid various headwinds including reduced immigration: in June the population was up just 0.7% Y/Y with the labour force up 0.3% (both post-2021 lows), while employment was up 0.7%.
• This is the last major release before the BOC's decision announcement on Wednesday July 15. At the June meeting, the statement was fairly neutral on the labor market even after May's blowout employment report, which was fair enough given that as noted "employment in Canada is little changed since the start of the year".
• Overall the flat growth in employment over the last year as a whole is indicative of labor market stability, making it for now a relatively neutral factor for monetary policy even as core inflation looks likely to have turned a corner higher after a series of below-expected readings.

ECB: Mixed Energy Price Evidence Behind Back To Square One Warning

Bank of Greece governor Stournaras earlier today warned on renewed upside inflation and downside growth risks from this week’s renewed US-Iran strikes, echoing Nagel from Wednesday. Comments of back to square one/back where we started go against crude oil futures where increases have been relatively contained although nat gas prices are closer to averages seen through the Middle East conflict (with gas/electricity having a larger weight than fuels in the HICP basket). 

• Describing how a halt to the US-Iran war last month prompted a decline in oil prices, he added “These developments, if sustained, could have led to higher growth and lower inflation compared to previous forecasts.” However, “Hostilities started again, so we are back to square one.”
• What happened “shows how precarious and volatile is the situation in the Middle East and as a consequence, energy prices. It also shows the uncertainty surrounding inflation forecasts and therefore the challenges that monetary policy has to face.”
• “There’s a very close correlation of energy prices with inflation, and Europe is still a large energy importer, so it’s crucial to have stable supplies from the Middle East. The resumption of hostilities means that these supplies have been cut again to some extent, so that has produced a lot of volatility.”
• Nagel on Wednesday: “But I guess some of you read the news from this morning. Now we are, I would say, back where we started. I hope still that maybe there's another outcome of that, but the latest news is that they stopped the peace talks - Trump on top announced that he will stop also trade with Spain. Yeah, strange. And energy prices went up again."
• 1st Brent currently trades around $75/bbl to sit between Wednesday’s high of $80.6 and levels closer to $71-72 before President Trump said the ceasefire was over. That’s in comparison to circa $95/bbl in the lead up to the June meeting, sustained periods above $100 through Mar-May and a brief peak of $126.
• That said, TTF natural gas prices are more elevated on a historical basis however, currently a little under E50/MWh for back close to levels at the June ECB meeting and also averages seen through the US-Iran conflict – see charts.
• A reminder however that gas prices have a larger weight in HICP than oil prices, with electricity & gas at 5.25% of the basket vs 3.83% for fuels & lubricants. These utility prices tend to feed through more slowly but can have a longer lasting inflationary impact. 

JGBS: Sharp Bull-Flattener After Fin Min Call To Invest Locally

JGB futures are sharply higher, +64 compared to settlement levels, but off session bests.

• Japan's corporate goods prices rose 7.1% in June from a year earlier, the fastest pace since early 2023.
• (Bloomberg) “ Japan's finance minister called for the nation's massive pension funds to increase investments in domestic assets. The remarks led to a jump in the yen and a drop in bond yields, with the yen strengthening and bonds rallying. Any changes to the Government Pension Investment Fund's investment strategy would have to go through an established process and could have broad implications, including a potential boost for the yen and Japanese equities.”
• The prospect that Japan's GPIF could bring funds home to buy JGBs is helping to send yields lower across the curve amid heavy short covering in JGB futures.
• Cash JGBs are flat to 11bps richer, with the long-end leading.
• Swap rates are 1-2bps higher. Longer swap spreads are sharply wider.

Bloomberg Finance LP

FOREX: FX OPTION EXPIRY

Of note:

• EURUSD 4.3bn at 1.1400/1.1450.
• USDJPY 1.23bn at 162.00 (mon).
• EURUSD 2.28bn at1.1400 (tue).
• EURUSD 1.43bn at 1.1390 (thu).
• USDCNY 1bn at 6.7435 (thu).

• EURUSD: 1.1380 (1.03bn), 1.1400 (1.42bn), 1.1405 (1.24bn), 1.1440 (472mln), 1.1450 (1.17bn).
• GBPUSD: 1.3400 (718mln).
• USDJPY: 161.00 (637mln).
• USDCAD: 1.4145 (489mln).
• AUDUSD: 0.6900 (573mln).

RATINGS: Stable Outlooks Up For Review After Close

{WO}🗓 RATINGS: Sovereign rating reviews of note scheduled for after hours on Friday include:

• Fitch on the Netherlands (current rating: Aaa; Outlook Stable)
• Morningstar DBRS on Switzerland (current rating: AAA, Stable Trend)
• Scope Ratings on Finland (current rating: AA; Outlook Stable) & Japan (current rating: A; Outlook Stable)
• Please use Hidden PDF to access the indicative 2026 sovereign rating review schedules across the five most prominent rating agencies (Fitch, Moody's, S&P, Morningstar DBRS & Scope Ratings).
• Note that the schedules are indicative only and ratings can be reviewed on an ad-hoc basis.
• Rating agencies may also adjust their schedules during the year.

FOREX: USDJPY Volatile Overnight, USD Index Threatens Close Below 20-Day EMA

• The dollar tilts marginally lower again on Friday owing to another dip lower for crude futures and slightly lower US yields on the session. The aggressive move south for USDJPY overnight prompted the DXY to break out of its contained range this week, and print a 100.60 low which closely coincides with the lows from last week.
• Subsequently, we have moved back into the prior 100.80-101.20 range. This consolidating price action keeps 20-day EMA support intact on a closing basis, and the bullish trend in place for now.
• USDJPY volatility was stoked by comments from Finance Minister Satsuki Katayama, who said the government wants to encourage pension funds, including the Government Pension Investment Fund, to increase investment in domestic financial assets.
• USDJPY fell from levels around 162.40 to session lows of 161.29, before slowly grinding back to current levels around 161.70. Overall, a bullish theme remains firmly intact and key support is not seen until 160.39, the 50-day EMA.
• Elsewhere, AUDNZD continues its weakening trend overnight, falling as low as 1.2014 in APAC trade. Momentum may have picked up on a break of trendline support, and the cross has significantly narrowed the gap to next key support at 1.1985.
• Canada June employment data headlines the Friday calendar.

EURUSD Consolidation Phase, EURGBP Continues Sequence of Lower Lows

• Alongside the contained price action for the dollar overall, EURUSD has had an extremely slow week trading within a 70pip range. While a short-term corrective cycle is in play, and there have been technical threats of a stronger recovery, a bearish trend condition remains intact overall. The bear trigger is 1.1325, the June 24 low, and clearance of it would mark a resumption of the downtrend.
• The bearish narrative is bolstered by some notable weakness in the crosses in recent sessions. We have flagged the recent medium-term breakdown for EURGBP through 0.8610, and a lower low in every session this week underscores the bearish momentum. The cross continues to edge closer to a prior low at 0.8508 and the base of the bear channel, just below the 0.85 handle.
• In similar vein, EURNZD has sparked some attention after falling 1.5% from the week’s high to a one-month low below 1.98.
• The economic calendar is void of any tier-one data releases in the Eurozone next week, although final inflation readings are scheduled Friday. This means broader global themes tied to the renewed conflict in the Middle East are likely to dominate, while notable levels of option expiries around the 1.14 handle for EURUSD will continue to be monitored. 

EQUITIES: E-Mini S&P Trend Set Up Remains Bullish

The trend needle in EuroStoxx 50 futures continues to point north, however, a sell-off this week highlights a corrective cycle that remains in play for now. The contract has traded through the 20-day EMA and attention turns to the next key support area around the 50-day EMA - at 6159.19. A clear break of the 50-day average would strengthen a bear threat. Key resistance is at 6462.00, the Jul 6 high. The trend condition in S&P E-Minis is unchanged, the set-up remains bullish. Note that moving average studies are in a bull-mode position and this continues to highlight a dominant uptrend. The rally on Jun 29 was a bullish engulfing candle - a reversal signal. It suggests the end of the recent corrective pullback. Key support lies at 7292.25, the Jun 11 low. A continuation higher would open 7693.75, the Jun 2 high and bull trigger.

COMMODITIES: This Week's WTI Rally Considered Corrective

A bearish trend structure in WTI futures remains intact and this week’s gains are considered corrective. The contract has recently traded through a key support at $75.45, the Apr 17 low. This strengthened the bear theme and opens $65.95, 76.4% of the Dec 16 - May 18 bull leg. Note too that moving average studies remain in a bear-mode position, highlighting a dominant downtrend. Initial firm resistance is at $79.51, the 50-day EMA. The trend set-up in Gold is unchanged, it remains bearish and the latest shallow recovery is considered corrective. Note that MA studies are in a bear-mode position -  this highlights a dominant downtrend. Furthermore the recent breach of $4024.0, the Jun 11 low, confirmed a resumption of the medium-term downtrend. A continuation of the bear leg would open the $3900.00 handle next. Firm resistance is at the 50-day EMA at $4318.0.

Date	GMT/Local	Impact	Country	Event
10/07/2026	-	***	CN	Money Supply
10/07/2026	-	***	CN	New Loans
10/07/2026	-	***	CN	Social Financing
10/07/2026	1200/0800	**	BR	Brazil Final CPI
10/07/2026	1200/0800	*	US	NY Fed SOFR
10/07/2026	1230/0830	*	CA	Building Permits
10/07/2026	1230/0830	***	CA	Labour Force Survey
10/07/2026	1300/0900	*	US	NY Fed EFFR
10/07/2026	1600/1200	***	US	USDA Crop Estimates - WASDE
10/07/2026	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly