JGBS: Modest Rally, Subdued Dealing, US 30Y Auction Later Today
JGB futures (JBU5) are stronger, +8 compared to settlement levels, hovering near Tokyo session highs.
- Japan’s bond futures had initially weakened after today’s enhanced liquidity auction of 15.5 - 39-year JGBs, but quickly reversed direction.
- (Bloomberg) -- Japan’s super-long bonds face the risk of higher volatility from rising foreign holdings, just as demand is absent from local life insurers, according to Morgan Stanley MUFG Securities. Foreign investors can sell to take profit when yields drop, and they can also choose to sell to cut losses, macro strategist Koichi Sugisaki told reporters at a briefing in Tokyo on Thursday.
- “Given that Ishiba could hold a summit with US President Donald Trump in Canada, he met with other party leaders to hear their opinions.” (BBG)
- Cash US tsys are ~2bps richer in today's Asia-Pac session with Middle East tensions in focus. US officials have been told Israel is fully ready to launch an operation into Iran. Investors will also be closely watching demand at today’s $22bn sale of 30-year bonds amid souring demand for that tenor.
- Cash JGBs are modestly richer across benchmarks, with the 5-year leading.
- Swap rates are ~1bp lower, with swap spreads wider.
- Tomorrow, the local calendar will see IP, Capu and Tertiary Industry data.
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BOBL TECHS: (M5) Short-Term Bear Cycle
- RES 4: 120.20 High Dec 12 ‘24 (cont)
- RES 3: 119.960 High Apr 7 and the bull trigger
- RES 2: 119.600/780 High May 7 / High Apr 22
- RES 1: 118.722/119.068 50- and 20-day EMA values
- PRICE: 118.260 @ 05:44 BST May 13
- SUP 1: 118.240 Intraday low
- SUP 2: 118.105 50.0% retracement of the Mar 6 - Apr 7 bull run
- SUP 3: 117.680 Low Apr 9 and a key support
- SUP 4: 117.600 Low Mar 28
A bull cycle in Bobl futures remains intact, however, for now a strong bearish corrective phase is in play and Monday’s sell-off strengthens a near-term bearish theme. The contract has traded through the 50-day EMA and cleared 118.543, 38.2% of the Mar 6 - Apr 7 bull run. This exposes 118.105, the 50.0% retracement. Initial resistance to watch is 119.068, the 20-day EMA. A break would signal a potential reversal.
EURUSD TECHS: Pierces The 50-Day EMA
- RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1608 High Nov 9 2021
- RES 2: 1.1440/1573 High Apr 23 / 21 and the bull trigger
- RES 1: 1.1256/1381 20-day EMA / High May 2 - 6
- PRICE: 1.1110 @ 05:55 BST May 13
- SUP 1: 1.1082/65 50-day EMA and a pivot level / Low May 12
- SUP 2: 1.1026 38.2% retracement of the Feb 3 - Apr 21 bull cycle
- SUP 3: 1.0943 Low Apr 10
- SUP 4: 1.0857 50.0% retracement of the Feb 3 - Apr 21 bull cycle
EURUSD maintains a softer tone and the pair traded sharply lower Monday. Recent weakness appears corrective and key trend signals remain bullish. However, the pair has breached the 20-day EMA and pierced 1.1082, the 50-day EMA. A clean break of the average would strengthen a bear threat. A key resistance to watch is 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction.
AUSSIE BONDS: Heavy Session As ACGBs Track Global Bonds
ACGBs (YM -11.0 & XM -7.5) are weaker and hovering near Sydney session lows.
- NAB business conditions fell 1 point from a month earlier to 2 in April, the lowest since August 2020.
- Cash US tsys are ~2bps richer in today's Asia-Pac session after yesterday's heavy session sparked by news that the US and China agreed to pause their retaliatory reciprocal tariffs for 90 days.
- Cash ACGBs are 7-10bps cheaper with the 3/10 curve flatter and the AU-US 10-year yield differential at -3bps.
- The bills strip has bear-steepened, with pricing -3 to -11.
- RBA-dated OIS pricing is 2-11bps firmer today with late 2025/early 2026 leading. This leaves meeting pricing 4-35bps firmer than levels before the release of Q1 CPI data on April 30. A 25bp rate cut in May is currently given a 96% probability, with a cumulative 82bps (117bps before the CPI data) of easing priced by year-end (based on an effective cash rate of 4.09%).
- Tomorrow, the local calendar will see Q1 Wage Price Index and Home Loans data.
- AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond tomorrow and A$800mn of the 2.50% 21 May 2030 bond on Friday.
