JGBS: Rally Extends During Ueda's Press Conference
JGB futures extended on their Tokyo rally after BoJ Governor Ueda underscored the Bank’s thoughts re: heightened uncertainty given the global trade backdrop, stressing that its hard to say when certainty around the outlook will rise again.
- Ueda confirmed that there is no change to the BoJ's hiking bias because underlying inflation is still expected to reach 2% within the projection period (latter half of FY26 and FY27), but the lack of firm commitment to hikes in the short-term provides further dovish feel.
- Futures topped out at 141.42, while 10-Year JGB yields printed as low as 1.252%, the lowest level seen since April 9.
- Next resistance in futures located at the April 17 high (141.54), with next yield support in 10s located at the April 9 low (1.251%).
- The intermediate area of the curve outperforms on the day, with 5s and 10s ~6bp lower at the cash close, while 2s are ~5bp lower.
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EUROZONE DATA: EZ PMI brings hope of bottoming out
There are some glimmers of hope in the EZ PMI print (hope that we are bottoming out rather than hope of improvement!) The following highlights from the press release:
- Output: "Only marginal overall, the expansion was the first in two years and the most marked since May 2022."
- "Production growth was accomplished despite a further monthly fall in volumes of incoming new business."
- "New factory orders fell in March, as they have done continuously for almost three years, but the rate of decline was the weakest over this period. Export* markets remained a drag on sales performances, with demand from foreign clients decreasing further. That said, the pace of contraction was the softest since April 2022."
- "Industrial business conditions remained challenging elsewhere, although there were some tentative signs of recovery, particularly in the currency union’s big-two economies of Germany and France as Manufacturing PMI figures here were the highest for 31 and 26 months, respectively."
BONDS: Bid Extends
The modest tilt lower in the final Eurozone manufacturing PMI and a downtick in crude oil futures lends further support to bonds. TY & bund futures are still shy of yesterday’s highs, while gilts have broken their Monday peak, registering a fresh session high in recent trade.
SONIA: Call spread vs put spread
SFIU5 96.00/96.10cs v 95.50/95.40ps, sold the cs at 3.5 in 4k.
