AUSSIE 10-YEAR TECHS: (Z5) Returns Lower

In local morning trade, NZGBs are 1-2bps richer after US tsys finished 2-7bps richer, with a steeper curve, but off early bests. 

• September's ISM Manufacturing Report showed a slight, if uneven, improvement in sectoral activity. US tsys had initially gapped higher after much lower than estimated private ADP employment numbers.
• (Bloomberg) -- New Zealand house prices rose for the first time in six months in September as borrowing costs fell, but values remain lower than a year ago.
• Prices rose 0.1% from August, when they dropped a revised 0.4%, property consultancy Cotality said Thursday in Wellington, citing its home value index. From a year earlier, the gauge fell 0.2%.
• We also saw September Auckland house sales and home price data, via Barfoot & Thompson. per BBG, average prices rose 0.8%m/m in Sep, while in y/y terms we were up by the same amount. Sales rose in m/m (the best Sep figures in four years), but were still down in y/y terms.
• Swap rates are 1-2bps lower.
• RBNZ dated OIS pricing is little changed across meetings. 33bps of easing is priced for October, with a cumulative 62bps by November 2025.
• 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.

Yen rose 0.56% for Wednesday's session, the second best performer in the G10 space (with NOK, +0.75%, only up more versus the USD). USD/JPY tracks close to 147.05/10 in early Thursday dealings. The pair is back under all key EMAs, (the 200-day is back at 147.87 on the topside). Sep lows at 145.49 are still some distance away though. 

• Several factors contributed to the extension of yen gains on Wednesday. First of all, ongoing concerns surrounding the US Government shutdown and uncertainty regarding upcoming data releases. Secondly, Wednesday's Tankan survey indicated solid business sentiment and earnings in September, likely to increase the odds of an October BOJ rate hike (although market pricing is little changed so far this week, around +15bps priced in for the meeting). Thirdly, weaker-than-expected US ADP employment data prompted a bump lower for US yields, providing an additional yen tailwind.
• US-JP yield differentials are back to fresh cycle lows for the 2yr spread, last at +258bps, while the 10yr spread is at +245bps, near Sep lows. USD/JPY still looks too high relative to lower yield differentials.
• On the local data front today we have the Sep monetary base data, along with weekly offshore investment flows. Later on we have Sep consumer confidence and a speech by BoJ Deputy Governor Uchida at 3:35pm local time. 

• 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 @ 16:05 BST Oct 01
• 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.