JGB TECHS: (Z5) Tilts Higher

Gold reached another record high on Tuesday rising to $3871.72/oz and finished September up almost 12%. Prices rose 0.7% to $3858.96 off the intraday low of $3793.23 as the US dollar weakened further (BBDXY -0.2%) and the 2-year yield was slightly lower. It has found support from the imminent US government shutdown. A senate vote to avoid this has just been held but failed to pass and the administration has told agencies to begin shutdown arrangements. The metal is currently trading around $3861.0.

• A US government shutdown will delay data including payrolls originally scheduled for Friday. It is forecast to show continued lacklustre job gains and is important for Fed easing expectations. Dallas Fed’s Logan (2026 FOMC member) said that rates can’t address all labour market weakness and easing should “proceed cautiously” as uncertainty is higher than “usual”.
• Gold’s bull cycle continues with it breaking above resistance at $3871.7 yesterday. The level to watch now is round number resistance at $3900.0. Moving average studies also highlight the dominant uptrend. Initial support is $3717.6, 24 September low.
• Silver underperformed yesterday falling 0.6% to $46.65 off the intraday low of $45.812. It reached $47.171 earlier. It finished the month up 17.4% boosted by safe haven and ETF flows but also a tight physical market. It is currently trading around $46.68.
• Equities rallied with the S&P up 0.4% and Euro stoxx +0.4% but the S&P e-mini is down 0.2% so far today. Oil prices fell with Brent -1.4% to $66.15/bbl. Copper was down 0.3%.

In post-Tokyo trade, JGB futures closed slightly weaker, -3 compared to settlement levels, 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.
• (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.
• Today, the local calendar will see Tankan Survey Results and S&P Global PMI Mfg (F).

ACGBs (YM -4.0 & XM -4.5) are weaker with attention on a possible US government shutdown. Nevertheless, Q3 ended on a mostly bullish note, as month- and quarter-end rebalancing added to expectations of Fed rate cuts.

• (Bloomberg) -- Australian home prices posted their strongest monthly gain in nearly two years, with an expanded government incentive for first home buyers expected to further intensify buyer demand at a time of already tight supply and declining borrowing costs.
• MNI RBA WATCH: Governor Michele Bullock declined to say whether the Reserve Bank of Australia retains an easing bias after the Board held the cash rate at 3.6% on Tuesday, stressing that future moves will depend on incoming data, with the current level still viewed as slightly restrictive.
• Cash ACGBs are 4-6bps cheaper with the AU-US 10-year yield differential at +21bps.
• The bills strip is -4 to -5 beyond the first contract.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in October is given a 35% probability, with a cumulative 11bps of easing priced by year-end.
• Today, the local calendar will also feature the S&P Global PMI Manufacturing (F).
• AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond.