JGBS: Sharp Bear Flattener, Q2 GDP Tomorrow
JGB futures are sharply weaker and near session lows, -39 compared to settlement levels.
- “Rakuten Bank, the online banking arm of Rakuten Group, will refrain from actively buying Japanese government bonds (JGBs), Bloomberg News reported on Thursday, citing a top official. CEO Tomotaka Tori said the group will hold its purchase until the Bank of Japan implements further interest rate hikes, citing market volatility and policy uncertainty.” (MTN via BBG)
- "They're behind the curve," Bessent told Bloomberg TV on Wednesday, noting that he discussed Japan's inflation problem with BOJ Governor Kazuo Ueda. "So they're going to be hiking and they need to get their inflation problem under control," he added." BBG
- JGBs are showing a bear-flattener across benchmarks, with yields flat to 5bps higher. The benchmark 5-year yield is 4.2bps higher at 1.106% after yesterday's poor auction.
- Swap rates are 3-5bps higher.
- Tomorrow, the local calendar will see Q2 GDP(P), IP(F), Capacity Utilisation and Weekly International Investment Flow data.
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BUND TECHS: (U5) Bear Cycle Intact
- RES 4: 131.95 High Jun 13 and the bull trigger
- RES 3: 131.33 High Jun 20
- RES 2: 130.76 High Jul 4
- RES 1: 130.06/130.31 20- and 50-day EMA values
- PRICE: 129.28 @ 05:36 BST Jul 15
- SUP 1: 129.08 Low Jul 14
- SUP 2: 128.97 Low May 14 and a reversal trigger
- SUP 3: 128.90 Low Apr 10
- SUP 4: 128.40 Low Apr 9
Bund futures are trading closer to their recent lows and a bear cycle remains intact. Last Friday’s extension resulted in a break of 129.30, the May 22 low. The breach strengthens the current bearish theme and exposes the next key support at 128.97, the May 14 low and a bear trigger. On the upside, resistance around the the 50-day EMA, at 130.31, marks the key short-term hurdle. A clear breach of it is required to highlight a possible reversal.
GOLD: Gold Pares Back Yesterday's Losses
- As President Trump takes aim at Russia, global risk sentiment is challenged.
- This has given gold a boost and it has rallied today in the Asia trading day to take back yesterday's losses.
- At US$3,360.48 gold is not far from its early June year highs and remains in a strong technical position with all major moving averages modestly upward sloping.
Gold sits above all major moving averages, the nearest being the 20-day EMA of $3,336.90.
source: Bloomberg Finance LP / MNI
BONDS: NZGBS: Closed With A Modest Bear-Steepener
NZGBs closed showing a modest bear-steepener, with benchmark yields 1-2bps higher. Ranges were narrow. The NZ-US 10-year yield differential is unchanged on the day at +15bps.
- Cash US tsys are little changed ahead of today’s US CPI data.
- “We expect an ageing population to put downward pressure on the neutral interest rate, but other factors may offset its impact,” the RBNZ said in a report published Tuesday in Wellington. Any impacts are likely to be gradual over decades, it said.” (per BBG)
- Swap rates closed 1bp higher.
- RBNZ dated OIS pricing closed little changed across meetings. 19bps of easing is priced for August, with a cumulative 33bps by November 2025.
- Tomorrow, the local calendar will see Non-Resident Bond Holdings data.
- On Thursday, the NZ Treasury plans to sell NZ$200mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 1.75% May-41 bond.
