FOREX: Tariff Letter Frenzy Caps USD/JPY Rally
Jul-08 09:23
- Trump's tariff letter-writing caught markets yesterday, prompting losses for equities and a negative close on Wall Street. Equity futures are yet to reverse, but are off the worst levels of the week headed into the crossover. The tariff headlines yesterday put paid to the USD/JPY rally that seems to have run out of steam into NY hours. That said, price remains in close proximity to 146.45, the weekly high and level above which the corrective move higher could resume. Through here, markets eye 148.03 for direction ahead of the Y149.73 200-dma.
- Triggers for a return higher in USD/JPY would be a re-widening of front-end US-Japan yield spreads or a corrective rally for the USD Index - which appears to be building a base at the recent pullback low of 96.377. While tariff uncertainties remain present, another likely delay to the installation of reciprocal tariffs to early August is keeping the USD downside argument intact, despite further warning signs over the pace of USD weakness this year - most recently via a PBOC survey issued to domestic banks earlier in the week.
- JPY is the poorest performer on the day, while AUD is the strongest. The RBA rate decision pushed back against building consensus for another rate cut by holding policy. AUD/USD trades back above 0.6500 as a result, and keeps the 50-dma support intact on any further downside.
- Following the data rush last week, there are no tier 1 releases due from the US Tuesday, although the NY Fed's latest survey on one-year inflation expectations could see some attention, expected to slow to 3.13% from 3.20%. The speaker schedule is similarly light, with just ECB's Nagel at 1500BST/1000ET.
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JGB TECHS: (M5) Rallies Off Lows
Jun-06 22:45
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.19 @ 15:53 GMT Jun 06
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: June 2025
Jun-06 21:24
We've just published our UST Issuance Deep Dive - Download Full Report Here
- May’s refunding round saw guidance as well as coupon sizes for the current quarter unchanged.
- The August round (Jul 28-30) could prove more compelling, reflecting both pressure at the long end of the Treasury curve as well as a shifting fiscal outlook amid tariff revenues contrasted with impending tax cuts (not to mention the likelihood of approaching the debt limit at around that time if it’s not lifted).
- Future Coupon Upsizing: We’ve seen some expectations that Treasury could lean against some of those trends in the August refunding, with potential signals if not immediate action on adjusting buybacks or even reducing issuance duration in order to reduce pressure on the long end. MNI’s current expectation is that coupon sizes will only be increased in early 2026. We will update in our next Deep Dive at end-June, with our full refunding preview coming in late July.
- Upcoming issuance: June is set to see $315B in nominal Treasury coupon sales, in addition to $23B in 10Y TIPS and $28B FRN for a total of $366B. Sales for the month start in the coming week, on Tuesday June 10 with $58B of 3Y Note, Wednesday June 11 with $39B of 10Y Note, and Thursday June 12 with $22B of 30Y Bond.
- May Auction Results: Against a backdrop of continued steepening pressure for global sovereign curves, May’s coupon auctions saw strong sales at the short-end/belly contrasted with tails at the long-end.
US FISCAL: Extraordinary Treasury Measures Tick Up As Cash Depletes
Jun-06 20:20
Treasury had $84B in "extraordinary measures" available to keep the government financed as of June 4 per a release Friday. That is up from $68B a week earlier though Treasury has exhausted three-quarters of the total initially available ($362B) when the debt limit impasse began in January.
- Combined with a pullback in Treasury cash ($376B), the total resources available to avert an "x-date" in the summer are down to a total $460B, the lowest since April 10 before the annual tax take accelerated.
- There will be another uptick in Treasury cash late next week/early the following week around the mid-June tax date, but this is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
