BUND TECHS: (Z5) Holding On To Its Recent Gains

JGB futures have maintained a negative bias, with the Sep future last near 137.34, -.18 versus settlement levels. We haven't tested sub 137.20 so far (session lows rest at 137.23). Broader trends have been skewed towards weaker futures with US 10yr futures back to flat after initially opening firmer. Aussie bond futures are down sharply, aided by a better Q2 GDP outcome. 

• The initial impetus in the cash JGB space was for steeper curves, led by the 20-40yr tenors. We sit away from session extremes though. The 10yr outright yield was last near 1.63%, little changed for the session.
• The 30yr was close to 3.26%, earlier highs were around 3.29%. The 2/30s JGB curve was last around +240bps (sessions highs were at +242bps). The 40yr was last up 3bps, near 3.50%, the 20yr around 2.67%, up 3bps.
• BOJ Governor Ueda met with PMI Ishiba to discuss the economy/markets. Ueda reiterated they will raise rates if the economy, prices move in line with forecasts.
• Domestic politics will remain in focus as well: "JAPAN LDP'S ASO SET TO CALL FOR EARLY PARTY ELECTION: MAINICHI" - BBG.
• The strong focus for tomorrow will be on the 30yr debt auction. 

The BBDXY has had a range of 1206.85 - 1208.92 in the Asia-Pac session, it is currently trading around 1208, +0.10%.  The USD has again found some solid demand around the 1200 area and is again attempting to bounce higher off this base. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows. The USD is looking comfortable for the moment above this support, not sure we get any clear direction though until the market sees what the NFP print is.

• EUR/USD -  Asian range 1.1625 - 1.1645, Asia is currently trading 1.1630. The pair is drifting back towards its first support around 1.1550, firmly within its wider 1.1350-1.1850 range.
• GBP/USD - Asian range 1.3361 - 1.3394, Asia is currently dealing around 1.3370. The pair collapsed in response to moves in UK bonds. Price is now testing its support around 1.3350, a sustained break below here opens up a move back to 1.3100, the USD’s bounce will add to the sterling's headwinds.
• USD/CNH - Asian range 7.1354-7.1453, the USD/CNY fix printed 7.1108, Asia is currently dealing around 7.1450. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
• Cross asset : SPX +0.10%, Gold $3535, US 10-Year 4.283%, BBDXY 1208, Crude Oil $65.41
• Data/Events : Italy HCOB PMI’s, EZ HCOB PMI’s & PPI, France HCOB PMI’s, Spain HCOB PMI’s, Germany HCOB PMI’s

Fig 1: GBP/USD Spot 2H Chart

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

Oil prices are moderately lower during today’s APAC session after rising around 1.5% on Tuesday as risk sentiment is weaker. WTI is down 0.3% to $65.41/bbl after rising to $65.72 earlier then falling to $65.35, a narrow range. Brent is 0.3% lower at $68.92/bbl following a peak of $69.24 and trough of $68.87. The USD index is up 0.1%. 

• OPEC+ meets on September 7 to discuss the production target for October. It has increased output over the last few months adding to excess supply concerns but is expected to leave quotas unchanged this time.
• With a global market surplus expected in coming months, inventory data remain important. US industry-based data for last week are released Wednesday.
• Also in terms of supply, the market is watching for developments on the Russia-Ukraine conflict. Progress towards peace appears to have stalled and US Treasury Secretary Bessent said that “all options are on the table”. A move away from Russian crude would increase demand for other global supplies.
• Today the Fed’s Musalem speaks and the Beige Book is published. US July JOLTS job openings & orders, European August services/composite PMIs and July euro area PPI print. Also, ECB President Lagarde, RBA Governor Bullock and BoE Breeden speak.