EM CEEMEA CREDIT: State Oil Co of the Azerbaijan Rep

• As treasuries begin trading in the Asia trading day, yields across the curve have opened 1-3bps higher.  
• The US 2-Yr is +1bp at 3.515%, having traded near to 3.50% but was unable to break below.  
• The US 5-Yr is up +2bps to 3.649% having closed prior to Columbus day at 3.626%.  
• The US 10-Yr is up +3bps to 4.067% having failed to test 4.00% and looks likely to remain in the 4.00% - 4.20% range for now, seeking a fresh catalyst to break out.  
• The US 30-Yr is up +3bps at 4.65%
• Futures are edging lower too as TYZ5 is down -02 at 113-02

Cash JGB curves are biased steeper as markets re-open from the long weekend. Focus will remain on domestic politics, fresh uncertainty risks driving the curve higher, as speculation continues around how LDP leader Takaichi will form a governing coalition (or whether she will be elected PM). Such a backdrop pushes back BoJ hike timing all else equal, (aiding a steeper curve), but may also make it difficult to pass any meaningful fiscal stimulus. 

• JGB futures sit off recent highs, last 136.10, +.20 versus settlement levels. The better risk tone, along with US Tsy futures maintaining a modest offered tone is weighing on JGBs. US Tsy yields have re-opened with a firmer bias and a steeper curve as well, the 10yr yield up 3bps to 4.06%.
• In the cash JGB space, the bias is for a steeper curve. The softest part in yield terms is the 3y to 7y, down around 1-2bps, led by the 7yr. The 10yr is down a touch to 1.68%. The 20-40yr tenors are firmer, led by the 30yr (+4bps to 3.245%).
• The 2/30s curve is steeper by +5bps to +233bps. Focus on the upside will be the +240bps region, which we haven't been able to sustain in recent months. 

After sinking around 5% on Friday driven by energy demand concerns in the face of renewed US-China trade tensions, oil prices recovered slightly on Monday following President Trump taking a step back and the associated improvement in risk appetite. There had also been a Ukrainian strike on a major Russian refinery on the weekend. The market watches these developments closely as they risk refined product supplies and may have contributed to an increase in Russian crude exports.

• WTI rose 1.1% to $59.56/bbl after reaching $60.17 and has started Tuesday around $59.76. Moves above $60 were brief. It is down 4.4% this month. Initial support is at $58.22, 10 October low, with resistance at $62.75, 50-day EMA.
• Brent is currently around $63.52/bbl after increasing 1.0% to $63.39. It was unable to break through $64 yesterday reaching $63.95. The benchmark is 4% lower in October with a bearish threat remaining. Initial support is at $62.00, 10 October low, while resistance is $66.31, 50-day EMA.
• OPEC published its October report on Monday keeping its oil demand forecasts unchanged at up 1.3mbd in 2025 and 1.4mbd in 2026. The group tends to be more optimistic than others. The IEA’s report is out Tuesday and it tends to be more cautious with it expecting a market surplus in 2026 for some time.
• Non-OPEC supply is forecast to rise 800kbd in 2025 and 600kbd in 2026 driven by US, Canada, Brazil & Argentina. Output from OPEC+ rose 630kbd in September according to the group’s report. It agreed to increase production by 137kbd in both October and November but most members are now facing capacity constraints which may impact its ability to lift supply and gain market share, except for Saudi Arabia.