AUSSIE BONDS: ACGB Nov-29 Supply Likely Supported RBA Easing Expns
Bidding at today’s A$700mn of the 2.75% 21 November 2029 bond, #TB154, is likely to be shaped by several key factors:
- The current yield is around the same level of the prior outing but around 45bps below the November 2024 high of 4.32%.
- The 3/10 yield curve is around 15-20bps steeper than the December auction and hovers just below its steepest level since August 2022.
- The line’s exclusion from the XM baskets may weigh on demand but sentiment towards global bonds may assist.
- On a positive note, market expectations for RBA easing in 2025 remain more aggressive than the guidance provided by Governor Bullock following the recent 25bp rate cut. While a 25bp rate cut in April is given only an 6% probability, a cumulative 66bps of easing priced by year-end.
- While firm pricing is anticipated at the auction, these factors may limit the overall strength of bidding.
- Results are due at 0000 GMT / 1100AEST.
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JGB TECHS: (H5) Fresh Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 139.04 @ 16:01 GMT Feb 18
- SUP 1: 138.83 - Low Feb 18
- SUP 2: 138.87 - 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.52 - 1.0% 10-dma envelope
A clear downtrend in JGB futures firmed further on the strong GDP print, with the latest fresh cycle lows reinforcing the condition. Note too that MA studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The 140.00 psychological handle has been pierced and markets have shown through 139.38, a Fibonacci projection. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. Gains would be considered corrective.
US: Trump States Auto/Pharma Tariffs Likely 25% From Early April
At an earlier press conference, US President Trump stated, in the Q&A, says he'll probably announce the tariff rate on autos on April 2, says it will "probably" be 25%; says for pharma it will probably be 25% or even higher.
Bloomberg reported: “I probably will tell you that on April 2, but it’ll be in the neighborhood of 25%,” Trump told reporters at his Mar-a-Lago club when asked about his plan for auto tariffs. Asked about similar levies on pharmaceutical drugs and semiconductor chips, the president said: “It’ll be 25% and higher, and it’ll go very substantially higher over a course of a year.” Trump said he wanted to give companies “time to come in” before announcing new import taxes. " See this link.
JGBS: Futures Higher Overnight Despite A Heavy Session For US Tsys
In post-Tokyo trade, JGB futures closed higher, +8 compared to settlement levels, despite a heavy session for US tsys on Tuesday.
- The seemingly dovish implications of Friday's weak retail sales report faded, with Fed Gov Waller late Monday expressing less optimism than usual over the prospect of near-term rate cuts.
- US data was mixed, with Empire State manufacturing beating and NAHB sentiment missing.
- Cash US tsys bear-steepened after Monday's holiday: the 2-Yr yield up 4bps at 4.30%, 5-Yr up 7bps at 4.40%, 10-Yr up 7bps at 4.55%, and 30-Yr up 7bps at 4.77%.
- Treasury supply resumes on Wednesday with $16B 20Y Bond auction, while we also get January housing starts/permits data and the January FOMC meeting minutes (followed by an appearance by Fed VC Jefferson).
- “I probably will tell you that on April 2, but it’ll be in the neighbourhood of 25%,” Trump told reporters at his Mar-a-Lago club when asked about his plan for auto tariffs.” (ICYMI from Trump's earlier press conference)
- Today, the local calendar will see Trade Balance, Core machine Orders and Tokyo Condominiums for Sale data alongside BoJ Rinban Operations 1-10-year and 25-year+ JGBs. Note as well we hear from BoJ board member Takata speaking in Miyagi.
