JGBS: Modest Early Moves Stick
JGB futures have nudged higher during the Tokyo afternoon, after unwinding overnight gains during early Tokyo trade. The contract last deals +13 as we work towards the bell.
- Firmer than expected household spending and wage data, coupled with a very modest dip in the wider fixed income sphere and an uptick for the Nikkei 225, provided early sources of pressure. Although it seems to be continued worry surrounding the situation in Taiwan (with Japan’s rhetoric resulting in the cancellation of a bilateral meeting between the Japanese & Chinese Foreign Ministers, in addition to the Japanese ambassador to China being summoned) that allowed a bid to reassert itself in the Tokyo afternoon.
- The early bull flattening has extended as a result, with the major cash JGB benchmarks running little changed to 4.5bp richer across the curve.
- Looking ahead, Monday’s domestic docket includes BoP data and the latest economy watchers survey.
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EUROZONE: Timeline of key events (Times BST)
| Date | Time | Country | Event |
| 06-Jul | 0700 | DE | Manufacturing Orders |
| 06-Jul | 0830 | EU | IHS Markit Final Eurozone Construction PMI |
| 06-Jul | 0900 | ES | Industrial Production |
| 06-Jul | 1000 | EU | Retail Sales |
| 07-Jul | 0700 | DE | Industrial Production |
| 07-Jul | 1045 | EU | ECB Lane on Green Transition at OECD Forum |
| 08-Jul | 0745 | FR | Foreign Trade / Current Account |
| 08-Jul | 0900 | IT | Industrial Production |
| 08-Jul | 1255 | EU | ECB Lagarde at Les Rencontres Economiques |
| 09-Jul | 1430 | EU | ECB Schnabel on Green Economy |
| 11-Jul | 0900 | IT | Retail Sales |
| 11-Jul | ---- | EU | ECB Lagarde & Panetta at Eurogroup Meeting |
| 12-Jul | ---- | EU | ECB de Guindos at ECOFIN Meeting |
| 12-Jul | 1000 | DE | ZEW Current Conditions / Expectations Index |
BTP TECHS: (U2) Bullish Theme
- RES 4: 130.00 Round number resistance
- RES 3: 129.00 High May 12
- RES 2: 127.79 High May 26
- RES 1: 126.41 High Jul 1 and the bull trigger
- PRICE: 124.63 @ Close Jul 5
- SUP 1: 122.18/119.81 20-day EMA / Low Jun 28 and key S/T support
- SUP 2: 118.60 Low Jun 22
- SUP 3: 115.72 Low Jun 16
- SUP 4: 113.78 Low Jun 14 and the bear trigger
BTP futures are unchanged and maintain a bullish short-term tone and last week’s gains reinforce this theme - price breached resistance at 122.80, the Jun 24 high. The break suggests potential for a stronger short-term correction and attention is on 127.79 the May 26 high. Initial support to watch is at 119.81, the Jun 28 low. A break of this level would instead signal a potential short-term top and the end of the current corrective cycle.
US TSYS: A Little Shy Of Tuesday’s Richest Levels
A fairly mundane round of Asia-Pac trade for Tsys saw weaker regional equity indices (on the back of recession fear & worry re: the COVID situation in China) and an early blip higher in oil after a heavy Tuesday session (with the bounce aided by Russian court rulings re: loading at one of its major ports) drawing most of the attention. The latter move moderated as we worked through overnight trade, likely aided by the former.
- TYU2 has stuck to a 0-07+ range on sub-standard volume of 75K, last dealing -0-04+ at 119-25, while cash Tsys run 2-3bp cheaper across the curve. Yields hold away from Tuesday’s lows after a late NY pullback which came alongside a recovery in U.S. equities post the European cash close (the S&P 500 finished +0.2% on Tuesday).
- There hasn’t been anything in the way of major macro news, nor meaningful market flow to flag since the Asia-Pac re-open, with the UK political situation dominating the headlines.
- Wednesday’s NY calendar is headlined by services ISM data and the release of the minutes from the most recent FOMC decision. We will also get weekly MBA mortgage apps, final services PMI data and the latest JOLTS job opening print. The release of the FOMC minutes from the June meeting will be bolstered by Fedspeak from NY Fed President Williams.
