JGBS: Modest Bear-Steepener, Subdued Session Ahead Of US Tax Bill
JGB futures are weaker, -33 compared to settlement levels.
- "Those JGBs issued by the Japanese government with super-low yields over the past decade were snapped up by one huge price-insensitive investor, the BoJ. Now that the BoJ wants to step back, long term yields are shooting up."
- "Why do "paper losses" on the central bank balance sheet matter? Well, the BoJ arranged a huge fixed-for-floating interest rate swap (1 GDP), paying floating and receiving fixed. If you consolidate the BoJ and the Treasury, that means huge losses for Japan's taxpayers. These "paper losses" measure the costs for Japanese taxpayers of failing to lock in low long rates."(per Hanno Lustig, see the below link) https://x.com/HannoLustig/status/1925215266402943062"
- Cash US tsys are ~1bp richer in today's Asia-Pac session.
- House Republicans have made a series of last-minute changes to their sprawling tax-and-spending bill, searching for a path that placates the party's warring wings just enough to get the bill passed at a pre-dawn vote on Thursday.
- Cash JGBs are showing a modest bear-steepener across benchmarks, with yields flat to 2bps higher.
- Swap rates are flat to 4bps higher, with a steepening bias.
- Tomorrow, the local calendar will see National CPI and Dept Sales data alongside BoJ Rinban Operations covering 1-25-year JGBs.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
OIL: Crude Higher But Down Sharply In April, Fed Speak Later
Oil prices are off today’s peaks but remain moderately higher although are holding onto most of yesterday’s losses. Benchmarks fell around 2% due to concerns of political interference in US monetary policy, which drove a pullback in risk. WTI is up 0.7% to $62.85/bbl down from the intraday peak of $63.25. Brent is 0.6% higher at $66.65 after reaching $67.05 earlier. They are down around 11% in April. The USD index is down another 0.2% after falling 0.7% on Monday.
- Markets continue to worry about the outlook for energy demand given increased protectionism and escalating trade tensions between the US and China at a time of expected excess supply. OPEC+ went ahead with its planned output increase in April, which was greater than expected which may have been because of pressure from President Trump to bring prices down.
- Not only are demand prospects highly uncertain, so is supply with talks between the US and Iran scheduled to resume on Wednesday. An agreement on Iran’s nuclear programme may result in an easing of sanctions. There could also be negotiations on a Ukraine-Russia truce in the coming week.
- Later the Fed’s Jefferson, Harker, Kashkari, Barkin and Kugler appear with the focus likely to be on any comments related to central bank independence. April Philly/Richmond Fed indices and preliminary April euro area consumer confidence print. The ECB’s de Guindos speaks.
BUND TECHS: (M5) Bullish Trend Structure Intact
- RES 4: 133.00 round number resistance
- RES 3: 132.56 High Feb 28 and a key resistance
- RES 2: 132.03 High Apr 7 and the bull trigger
- RES 1: 131.83 High Apr 17
- PRICE: 131.65 @ 05:39 BST Apr 22
- SUP 1: 130.87/130.14 Low Apr 17 / 20-day EMA
- SUP 2: 129.02 Low Apr 10
- SUP 3: 128.60 Low Apr 9 and a key support
- SUP 4: 128.47 Low Mar 28
Bund futures are unchanged and continue to trade closer to their recent highs. A bull cycle remains in play and the pullback between Apr 7 - 9 is considered corrective. A fresh S/T cycle high on Apr 7 reinforces a bullish theme. The contract has recently cleared 131.14, 76.4% of the Feb 28 - Mar 11 bear leg. This opens 132.56 next, the Feb 28 high. Firm support lies at 128.60, the Apr 9 low. A break below this level would alter the picture.
BONDS: Modest Twist-Steepener To Start The Week
NZGBs closed showing a twist-steepener, with benchmark yields 2bps lower to 2bps higher.
- Cash US tsys are slightly cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's long-end sell-off. Fed Vice Chair Philip Jefferson as well as regional Fed chiefs Tom Barkin (Richmond), Neel Kashkari (Minneapolis) and Patrick Harker (Philadelphia) are scheduled to speak later Tuesday.
- NZ recorded its third merchandise trade surplus in four months in March at $970mn up from $392mn. The YTD deficit narrowed to $6.13bn from $6.63bn. It has now declined around $11bn since the May 2023 peak. Both export and import growth were robust last month. Trade is a bright spot in NZ’s struggling economy but with a 10% tariff on goods to the US and an escalating US-China trade war the outlook is highly uncertain and likely to be negative.
- Swaps closed showing a bull-steepener, with rates 1-5bps lower.
- RBNZ dated OIS pricing closed flat to 3bps softer across meetings, with late 2025 / early 2026 leading. 27bps of easing is priced for May, with a cumulative 83bps by November 2025.
- Tomorrow, the local calendar will be empty.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$250mn of the 4.25% May-36 bond.
