THAILAND: VIEW: JP Morgan Brings Forward Remaining Rate Cuts

In Tokyo morning trade, JGB futures are slightly weaker, -3 compared to settlement levels.

• Today, the local calendar will be empty apart from 5-year Climate Transition supply.
• Cash US tsys are slightly cheaper in today’s Asia-Pac session after yesterday’s modest sell-off. Focus is on Tuesday's June CPI inflation data and several Fed speakers ahead of Friday evening's policy blackout. Consensus sees core CPI inflation at a seasonally adjusted 0.3% M/M in June on a rounded basis, but with sizeable risk of undershooting at 0.2% (MNI median unrounded estimate at 0.24% M/M /average 0.25%).
• Cash JGBs are flat to 9bps cheaper across benchmarks, with a steeper curve. The benchmark 10-year yield is 0.3bp higher at 1.585% after revisiting the cycle high of 1.596% earlier in the session.
• (Bloomberg) “Fixed income investors are paying extra attention to rising Japanese yields for their global impact, yet it is Treasuries which are still the driving force behind G-10 debt markets. The next major catalyst for global yields to spread anxiety across asset classes will be 30-year Treasury yields surpassing the peak seen in May, which looks likely given the US passed the huge tax and spending bill that almost guarantees an even wider fiscal deficit.”
• Swap rates are ~1bp higher. Swap spreads are mostly tighter.

The ESU5 overnight range was 6259.75 - 6315.00, Asia is currently trading around 6305. The September contract lifted off the 6250 area and has closed back above 6300. This morning has seen US futures open a little lower, ESU5 -0.10%, NQU5 -0.10%. US Stocks have shrugged off the latest tariff threats and instead focused on the fact Trump said he is still open to more trade negotiations.

• Wei Li(BlackRock) on LinkedIn: “ONE MYSTERY that the team has been debating all week – who will bear the cost of higher tariffs? Is it: Consumers? Yet to show up meaningfully, all eyes on CPI tonight; Corporates? But it is not consistent with profit margin making new highs, all eyes on earnings kicking off this week; Foreign suppliers? I’ve only seen some inconclusive evidence at best.”
• Lance Roberts on X: “Housing, which makes up over 40% of the CPI index, continues to weaken. Both the number of home sales and prices continue to decline." See Graph Below.
• Mark Zandi on X: ”I sent off a yellow flare on the housing market in a post a couple of weeks ago, but I now think a red flare is more appropriate. Home sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon. That, however, seems unlikely.”
• (Bloomberg) - “Wall Street banks are poised to post gains largely from record trading in the aftermath of Trump’s “Liberation Day” shock. Analysts expect Goldman to lead in equities and JPMorgan in FICC, with investors watching for guidance on how lenders plan to ride regulatory tailwinds”
• Short-term this is starting to look a little overdone but the market clearly disagrees for now and sees the potential for a melt-up. First support is back towards the 6100 area.

Fig 1: National Month-Over-Month HPA

Source: MNI/@lanceRoberts

The start of the week saw positive inflow momentum into South Korea and Thailand, but mostly softer trends elsewhere. South Korea's Kospi continues to rally, testing through 3200, amid bullish sell-side optimism (on reform hopes and earnings). This is likely aiding a return of offshore inflows, although year to date flows remain firmly in negative territory, so there is still scope for catch up. 

• Taiwan saw net outflows yesterday, trimming net inflows seen in the past 5 trading sessions. At the end of last week, India saw sharp outflows, the largest since the end of May.
• Offshore investors returned to net selling Indonesian stocks yesterday, a consistent theme since the start of July.
• The rebound in the SET Thailand index (which gained a further +2% yesterday) is drawing in flows, with month to date offshore buying now back into positive territory. 

Table 1: Asian Markets Net Equity Flows

Source: Bloomberg Finance L.P./MNI