JGBS: Modest Bear-Steepener, Narrow Ranges With The US Markets Out
JGB futures are slightly stronger and at session highs, +2 compared to settlement levels.
- Japan's real household spending for May rose 4.7%y/y, well above market forecasts of a 1.2% gain. The April outcome was -0.1%y/y. In m/m terms, spending was up a strong 4.6%.
- (Bloomberg) - The grind higher in JGB long-end yields isn't done yet, with Japan's spring wage talks delivering the biggest pay bump in 34 years. Add to that today's pop in household spending -- the strongest since mid-2022 -- and the data drumbeat is starting to give the BOJ exactly what it's been looking for.
- "TACHIBANA: POLICY UNCHANGED FOR SINCERE TARIFF TALKS WITH US" – BBG
- Cash JGBs are flat to 2bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 0.4bps higher at 1.446% versus the cycle high of 1.596%.
- Ranges have, however, been narrow with the US markets out for the 4th of July holiday. US 10-year futures are trading slightly higher.
- Swaps have twist-steepened, with rates 1bp lower to 1bp higher.
- On Monday, the local calendar will see Labor & Real Cash Earnings and Coincident/Leading Index.
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JGBS: Bear-Steepener, Tomorrow's 30Y Supply In Focus
JGB futures are holding weaker, -16 compared to settlement levels, on a data-light local session.
- Bloomberg - "The 10-year auction earlier this week drew strong demand, but attention now shifts to Thursday's 30-year sale -- the true litmus test for investor appetite. Ultra-long bonds remain the market's weak point, and their performance will determine whether recent volatility persists."
- MNI POLICY: Bank of Japan officials will closely watch the upcoming June Tankan survey, due July 1, for signs of resilience in non-manufacturers' sentiment and upward revisions to major firms' capital investment plans, which would support its baseline view for a gradual rate-hike path, MNI understands.
- Cash US tsys are little changed in today's Asia-Pac session after yesterday's modest losses. Today’s US calendar will see ADP, S&P Services PMI, ISM Services Index and Fed Beige Book data.
- Cash JGBs are flat to 3bps cheaper across benchmarks, with a steeper curve. The benchmark 30-year yield is 1.1bps higher at 2.955% ahead of tomorrow’s supply.
- Swap rates are flat to 3bps higher.
- Tomorrow, the local calendar will see Cash Earnings and International Investment Flow data alongside 30-year supply.
FOREX: Asia FX Wrap - Quiet Session
The BBDXY has had a range of 1211.72 - 1214.14 in the Asia-Pac session, it is currently trading around 1214. "NATO is pushing European members to expand ground-based air-defense capabilities fivefold in response to the threat of Russian aggression, people familiar said. Trump will attend the alliance’s summit in The Hague later this month, the White House said.”(BBG)
- EUR/USD - Asian range 1.1366 - 1.1393, Asia is currently trading 1.1370. EUR has drifted sideways during the Asian session. Dips should continue to find support, the demand back towards 1.1200 proved to be solid last week.
- GBP/USD - Asian range 1.3513 - 1.3545, Asia is currently dealing around 1.3515. The GBP is attempting another run higher but is struggling to gain any momentum on a 1.3500 handle. Look for an opportunity to buy again back towards the 13300/3400 area if seen.
- USD/CNH - Asian range 7.1829 - 7.1944, the USD/CNY fix printed 7.1886. Asia is currently dealing around 7.1915. Sellers should be around on bounces while price holds below the 7.2500 area.
- Cross asset : SPX -0.07%, Gold $3356, US 10-Year 4.44%, BBDXY 1214, Crude oil $63.13
Data/Events : Spain Industrial Production & Services PMI, Italy Serv PMI, France Serv PMI, Germ Serv PMI, EC Serv PMI
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
EURUSD TECHS: Bull Cycle Intact
- 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 High Jun 03
- PRICE: 1.1369 @ 06:03 BST Jun 4
- SUP 1: 1.1313 20-day EMA
- SUP 2: 1.1190/1.1065 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 despite yesterday’s pullback. The recent 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. Moving average studies remain in a bull-mode position, highlighting a clear uptrend. Support to watch lies at 1.1190, the 50-day EMA. A clear break of this average would undermine the bull theme and signal scope for a deeper retracement.
