JGBS: Sell Off After Rengo Wage Demands Hit Highest Level Since '93
Futures sell off in post-Tokyo trade after Rengo annual wage demands hit the highest level since ’93 (+6.09%).
- This has factored into the wider sell off in bonds since European trade got underway, with core global FI markets remaining fragile after yesterday’s meaningful sell off that followed German political leaders’ reduction in fiscal restraint.
- JGB futures moved from 138.53 to as low as 138.12 following the Rengo headlines, before a recovery to 138.30.
- Next support located at the 1.0 10-DMA envelope (137.97).
- 10-Year JGB yields hit a fresh cycle high above 1.55%, before easing back to ~1.54% at the close.
- The ’09 high at 1.570% presents the next upside level of note in that benchmark.
- 2s10s steepened by ~2bp following the Rengo headlines, hitting the steepest level seen since ‘July, closing ~8.5bp higher on the day at 68bp.
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STIR: SFRZ5/Z6 Sold
SFRZ5/Z6 4K given at -0.5.
GILTS: Weaker On Canadian Tariff Reprieve
Gilts sell off at the open, adjusting to Canada’s short-term tariff reprieve that has been covered in detail elsewhere.
- Futures as low as 92.67 before a recovery to 92.80.
- The recent corrective bullish cycle in the contract extended yesterday.
- Initial support and resistance located at the 20-day EMA (92.11) and yesterday’s high (93.54), respectively.
- Yields 1.5-3.0bp higher, curve bear steepens.
- GBP STIRs still operate around pre-gilt open levels, ~80bp of BoE cuts priced through year-end.
- The DMO will come to market with GBP4.25bln of the 4.375 Mar-30 gilt this morning.
- Little else of note on the UK calendar, which will leave focus on cross-asset cues and tariff-related headlines.
- Our BoE preview will be published later today.
SILVER TECHS: Trading At Its Recent Highs
- RES 4: $34.903 - High Oct 23 and the bull trigger
- RES 3: $33.125 - High Nov 1
- RES 2: $32.338 - High Dec 12 and a key resistance
- RES 1: $31.737 - High Jan 30
- PRICE: $31.479 @ 08:05 GMT Feb 4
- SUP 1: $29.704/28.748 - Low Jan 27 / Low Dec 19 and bear trigger
- SUP 2: $28.446 - 76.4% retracement of the Aug 8 - Oct 23 bull cycle
- SUP 3: $27.686 - Low Sep 6
- SUP 4: $26.451 - Low Aug 8
Silver continues to trade at its recent highs. A bear cycle that started on Oct 23 last year remains in play and recent gains are considered corrective. However, the latest move higher does suggest scope for a continuation near-term. An extension would expose key resistance at $32.338, the Dec 12 high. Clearance of this level would highlight a reversal. Support to watch is $29.704, the Jan 27 low, and $28.748, the Dec 19 low and the bear trigger.
