OIL: Oil in Weekly Decline as Brent Challenges Key Technical

At the Tokyo lunch break, JGB futures are stronger, +11 compared to settlement levels.

• The Q3 Tankan survey printed in line with expectations and Q2 but FY25 capex intentions increased 1pp to 12.5%. Large company business conditions have been moving sideways at a solid level since the start of last year, especially for the non-manufacturing sector.
• The large manufacturers' index rose 1 point to 14 in Q3 while the outlook for Q4 is forecast to deteriorate 2 points. The series has not been affected by new US tariffs and the 2025 average is slightly higher than 2024's.
• Non-manufacturers' conditions were steady at 34, well above the series average of +7.3, with the outlook at 28.
• Small non-manufacturers are also outperforming manufacturers with the index at 14 (down 1 point) compared to +1 (stable). The outlook for both sectors improved 1 point.
• The September BoJ summary of opinions showed a bias towards a resumption of tightening.
• (Bloomberg) Japan will get its second prime minister in just over a year when the ruling Liberal Democratic Party holds a leadership election on Oct. 4.
• Cash US tsys are slightly mixed, with a steepening bias, in today's Asia-Pac session after yesterday's modest twist-steepener.
• Cash JGBs are little changed across benchmarks.
• Swap rates are flat to 1bp lower, with a steepening bias. Swap spreads are mixed.

ACGBs (YM -4.0 & XM -5.5) remain weaker.

• S&P Global PMI Manufacturing Index falls to 51.4 from 53 in Aug.
• Cash US tsys are slightly cheaper in today's Asia-Pac session after yesterday's modest twist-steepener.
• Cash ACGBs are 4-7bps cheaper with the AU-US 10-year yield differential at +22bps.
• The latest ACGB Dec-34 supply achieved a weighted average yield that printed 0.40bp through prevailing mids (per Yieldbroker). However, the cover ratio decreased to 2.1033x, thelowest since its debut in 2023, from 3.1708x.
• The bills strip is -4 to -6 beyond the first contract.
• RBA-dated OIS pricing has firmed modestly across meetings following yesterday’s RBA Policy Decision.  Pricing across meetings is 1-4bps firmer than yesterday’s pre-RBA levels. Notably, this post-RBA move leaves pricing some 10-19bps firmer than last Wednesday’s pre-CPI levels.
• A 25bp rate cut in October is given a 35% probability, with a cumulative 11bps of easing priced by year-end.

RBA-dated OIS pricing has firmed modestly across meetings following yesterday’s RBA Policy Decision.  

• At the time of writing, pricing across meetings was 1-4bps firmer than yesterday’s pre-RBA levels.
• Notably, this post-RBA move leaves pricing some 10-19bps firmer than last Wednesday’s pre-CPI levels.
• A 25bp rate cut in October is given a 35% probability, with a cumulative 11bps of easing priced by year-end.

Figure 1: RBA-Dated OIS – Current Vs. Pre-CPI

Source: Bloomberg Finance LP / MNI