AUSSIE 10-YEAR TECHS: (Z5) Returns Lower

In local morning trade, NZGBs are unchanged after US tsys finished with a modest twist-steepener.

• US Govt likely to shutdown at midnight tonight - the first time since late Dec 2018 when the government shutterd for 35 consecutive days.
• "SENATE TO VOTE THIS WEEKEND ON REOPENING GOVERNMENT", Bbg.
• "BLS will suspend all operations. Economic data that are scheduled to be released during the lapse will not be released. All active data collection activities for BLS surveys will cease. The BLS website will not be updated with new content or restored in the event of a technical failure during a lapse."
• MNI INTERVIEW: RBNZ To Eye 2% OCR Level - Ex Assistant Gov. The Reserve Bank of New Zealand is likely to need to cut the 3% Official Cash Rate by 100 basis points over the medium term to stabilise output and inflation following weaker-than-expected Q2 GDP data, a former assistant governor told MNI.
• NZ home-building approvals rose 5.8% m/m in August versus revised +5.3% in July
• Swap rates are little changed.
• RBNZ dated OIS pricing is little changed across meetings. 34bps of easing is priced for October, with a cumulative 62bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$200mn of the 4.50% May-35 bond.

• RES 3: 140.08 High Jun 13  
• RES 2: 139.05 High Aug 4 
• RES 1: 137.30 - High Sep 8 and key short-term resistance
• PRICE: 135.85 @ 16:25 BST Sep 30
• SUP 1: 135.67 - Low Sep 26 
• SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
• SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)  

A bear threat in JGB futures remains present and the contract has pulled back from its recent highs. The latest sell-off has also resulted in a break of support at 136.19, the Sep 4 low and a bear trigger. Clearance of this level confirms a resumption of the downtrend and opens 135.39 next, a Fibonacci projection. Key short-term resistance has been defined at 137.30, the Sep 8 high.  

The overnight range was 147.66 - 148.35, Asia is currently trading around 147.90. The USD has no friends as the sellers are quick to return on what looks to be an imminent US shutdown. Once the demand around 148.50 was filled the price moved very quickly lower and we are once again right back in the very familiar recent range. The Payrolls data this week was to be critical so should we not get it due to a shutdown the ADP print tonight could take on larger significance. First support is seen around 147.50 then back toward the bottom of the range around 146.00.

• (Bloomberg) - “Markets are focused on how Japan will finance $550 billion in investment it has agreed to make in the US as part of a trade deal with President Donald Trump. The readily available resources that meet Tokyo’s funding conditions don’t look sufficient — we see a $250 billion shortfall.”
• “The 3Q Tankan is set to show resilient business sentiment, reinforcing the case for the Bank of Japan to pare stimulus as early as October, writes Bloomberg Economics.” - BBG
• MNI: BOJ Opinions: Board Split Over Rate Hike, Inflation. Bank of Japan board members were split over whether to raise the policy rate at the September 18-19 meeting, with some calling for more data and others pushing for an increase, the summary of opinions released Tuesday showed.
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.15($864m), 146.50($1.09b), 147.50($650m). Upcoming Close Strikes : 147.00($1.21b Oct 6), 148.00($1.15b Oct 2) - BBG.
• CFTC data shows last week asset managers increased their JPY longs slightly +79262( Last +71162), leveraged funds though again used the dip to add to their short position as the support held, -634171(Last -58811). The diverging views amongst investors continue to build.
• Data/Event : Tankan Survey, S&P Global Japan PMI Mfg

Fig 1 : USD/JPY Spot 2H Chart

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