JGBS: Richer With Global Bonds As Israel Strikes Iran

Jun-13 05:08

JGB futures (JBU5) are sharply stronger at 139.30, +48 compared to settlement levels, but well off session bests (138.80).

  • News that Israel had conducted an airstrike in Iran earlier today sent global yields tumbling.
  • Netanyahu said that this was a decisive moment in Israel's history, and added that the military operation will continue for as many days as it takes to remove the threat. (per RTRS/BBG).
  • Iran stated that it will respond harshly against the US and Israel in response to the attacks.
  • Cash US tsys are 1-3bps richer, with a steepening bias, in today's Asia-Pac session.
  • The Bank of Japan (BoJ) is expected to keep its policy rate unchanged at 0.50% at its June 16–17 meeting, with focus turning to whether it will slow the pace of its JGB purchase reductions. The BoJ is likely to outline its bond-buying schedule through Q1 2027 to provide more transparency while maintaining flexibility. Markets see little risk of a rate hike at this meeting, with a projected policy rate of 0.60% by December.
  • Cash JGBs are 2-5bps richer across benchmarks, with a flatter curve.
  • Swap rates are flat to 6bps lower.
  • The local calendar will be empty on Monday, ahead of the BoJ Policy Decision on Tuesday. 

Historical bullets

EURUSD TECHS: Support At The 50-Day EMA Remains Intact

May-14 05:07
  • 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: 1.1249/1381 20-day EMA / High May 2 - 6  
  • PRICE: 1.1191 @ 06:06 BST May 14
  • SUP 1: 1.1086/65 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. Note that a key support at the 50-day EMA, at 1.10786, remains intact. A clean break of this average would undermine the uptrend. A key resistance to watch is 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction.

BUND TECHS: (M5) Bear Cycle Remains Intact

May-14 05:02
  • RES 4: 133.00 round number resistance                
  • RES 3: 132.56 High Feb 28 and a key resistance     
  • RES 2: 131.72/132.03 High May 7 / High Apr 7 and the bull trigger
  • RES 1: 130.53/72 50- and 20-day EMA values                    
  • PRICE: 129.45 @ 05:46 BST May 14
  • SUP 1: 129.37 Low May 12            
  • SUP 2: 129.28 50.0% retracement of the Mar 11 - Apr 7 rally            
  • SUP 3: 129.02 Low Apr 10   
  • SUP 4:  128.60 Low Apr 9 and a key support 

A short-term bearish theme in Bund futures remains intact. The contract has traded through support at the 50-day EMA, at 130.53. This signals scope for a deeper retracement and this week’s extension strengthens the current bearish threat. A continuation lower opens 129.28, a Fibonacci retracement. It is still possible that the move down since Apr 22 is a correction.  Initial resistance to watch is 130.72, the 20-day EMA. 

JGBS: Cash Bonds Little Changed, 5Y Supply Tomorrow, Q1 GDP On Friday

May-14 05:01

JGB futures are stronger, +7 compared to the settlement levels, after dealing in a relatively narrow range in today’s Tokyo session.

  • There has been no net movement in cash US tsys in today's Asia-Pac session after being little changed yesterday following the release of April CPI data.
  • Cash JGB movements are bounded by +/- 1bp out to the 30-year and 3bps richer beyond.
  • “Japanese 30-year yields avoided climbing above 3% this week after a solid auction, but that looks like a temporary reprieve as rising German yields are likely to drag JGBs in the same direction. Indeed, bunds appear to be heading back toward the levels seen in March, even though the European Central Bank is forecast to lower interest rates again this year. Similar to Japan, the background is increased spending, especially on defence which will add to upward pressure on long-term rates.” (per BBG)
  • The benchmark 10-year yield is 0.7bps higher at 1.451% versus the cycle high of 1.596%.
  • Swap rates are 1bp lower to 2bp higher, with a steepening bias. Swap spreads are mixed.
  • Tomorrow, the local calendar will see International Investment Flow and Machine Tool Orders data alongside 5-year supply. Q1 GDP (P) is due on Friday.