STIR: US Leads Bloc Markets Rates Lower Since Late August

The Japanese Ministry Of Finance (MoF) sells ¥ 1,842.1bn 5-Year JGBs:

• Average Yield: 1.056% (prev. 0.989%)
• Average Price: 99.74 (prev. 100.05)
• High Yield: 1.062% (prev. 0.993%)
• Low price: 99.71 (prev. 100.03)
• % Allotted At High Yield: 67.7077% (prev. 6.9288%)
• Bid/Cover: 2.9616x (prev. 3.5411x)

US Equities stormed to new all-time highs in the N/Y session as the market gears up for a potential series of rate cuts. This morning US futures have opened pretty muted albeit still at their highs, ESU5 -0.04%, NQU5 +0.03% The JPY crosses remain better bid as risk extends higher, GBP/JPY leads the move eyeing a test of 200.00.

• EUR/JPY - Overnight range 172.08 - 172.86, Asia is trading around 173.00. This pair bounced off its support just below 170.00 and has put a base in now around 170.00. While risk continues to trade positive this will remain bid now on dips.
• GBP/JPY - Overnight 198.13 - 200.08, Asia trades around 199.90. Risk has broken higher again overnight and there has been no sign of a pullback which has seen the pair blow through what should have been decent resistance. A move back above 200.00 could generate fresh impetus higher and dips back towards 198.50 should now find support first up.
• NZD/JPY - Overnight range 87.80 - 88.18, Asia is currently dealing 88.20. The pair found solid demand towards the 86.50 area, I felt sellers should remerge on a bounce back towards 88.50 first up but the price action in the other JPY crosses would make you question a fade for now. A sustained move back above 89.00 would reinstate the momentum higher.
• CNH/JPY - Overnight range 20.5518 - 20.6465, Asia is currently trading around 20.6100. This pair found solid demand back towards its first support area around 2.4000. A sustained break back below 2.3000 is needed to turn momentum lower again, until then dips will probably continue to be supported.

Fig 1 : GBP/JPY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

ACGBs (YM +1.5 & XM +0.5) are slightly stronger after today’s wages data.

• The Q2 WPI rose 0.8% q/q leaving annual inflation at 3.4% y/y after a recent trough at 3.2% in Q4 2024 and 4.1% in Q2 2024. Public sector quarterly wage gains outpaced the private sector for the third consecutive quarter at 1.0% q/q compared with 0.8%. Public wage growth is now up 0.1pp to 3.7% y/y, while private was 3.4% y/y. The RBA had forecast 3.3% for Q2 and in its August projections is expecting the WPI to trend lower to around 3% by Q2 2026. 2025 to date is showing some stabilisation in wage inflation.
• Cash US tsys are slightly mixed, with a flattening bias, in today’s Asia-Pac session.
• Cash ACGBs are flat to 2bps richer with a steeper 3/10 curve and the AU-US 10-year yield differential at -5bps.
• Expectations of sustained strong pricing at auctions proved accurate, with the latest round of ACGB Dec-35 supply seeing the weighted average yield print 0.22bp through prevailing mids. Moreover, today’s cover ratio rose to 3.2417x from 2.6500x.
• The bills strip is +1 to +3.
• RBA-dated OIS pricing is slightly softer across meetings today. A 25bp rate cut in September is given a 41% probability, with a cumulative 40bps of easing priced by year-end.