Landmines of Market Moving Catalysts Everywhere This Week
JGBs have been driving JPY and USTs since yentervention. US CPI, FOMC, BOJ, JGB buy Ops, JGB quarterly futures expiry - each with global market moving potential. Navigate the week's landmines.
Here is what’s ahead this week relevant to moving global green and red blinking tickers, and what markets and levels to be keenly aware of throughout the week - followed by a market overview of how JGBs have whipped around US yields in the post-yentervention month to current as we head into macro landmine week.
US, Japan (& therefore Global) FX & Rates Potential Market Catalysts Calendar
Mon June 10th:
🇯🇵Data: GDP (not important) & Balance of Payments (less unimportant) - Japan AM open pre-market
10Y UST Auction
Wednesday June 12th:
BOJ Regular Scheduled JGB Buying Operation: targeting 1-3Y, 3-5Y, 5-10Y and >25Y JGBs (buying amount and details released 10:10AM Japan, results of operation released ~12:30PM)
US CPI
US June FOMC + Dot Plots
Thursday June 13th:
June’24 10Y JGB Futures Last Trade Date
June BOJ Meeting Day 1 of 2 (and therefore, also potential “Nikkei policy leak day/night”)
Friday June 14th:
June’24 10Y JGB Futures and Options Quarterly Expiration Date
June BOJ Policy Announcement (around 12PM noon Japan / 11PM ~ past midnight US EST)
Governor Ueda Press Conference 15:30 Japan
Monday June 17th:
CME June’24 JPY Futures & Options Last Trade Date before quarterly expiry
Near Term Market Price Levels To Watch
FX:
USDCNY above 7.275
MXNJPY below 8.0 (see why MXNJPY carry trade unwind matters to global cross-asset here)
EURJPY above 171.50
AUDJPY above 105
USDKRW above 1400
June’24 JPY Futures below 0.006375 (by Fri)
Rates:
JGB 2Y above 0.4%
JGB 5Y above 0.65%, below 0.50%
JGB 30Y below 2%
June’24 10Y JGB Futures at/below 143.0, above 144.25 (by Thurs)
Sept’24 2Y UST Futures below 101’10, above 101’30
Note- neither the calendar nor the markets and price levels are comprehensive in any way - these are bare minimums to be aware of, and will be explained as to why.
If you’re wondering why EUR has remained fairly dead flat in price action within a narrow trading range after the ECB cut rates last week, while at the same time guiding for higher inflation outlook - its not because the June ECB cut was widely expected (policy cut itself was of zero market moving importance). But it’s also not about a baffled and therefore frozen market - this isn’t some unanimous consensus interpretation of policy confusion that then results in a uniform all-hands-off market response.
The reason European markets didn’t really do much directionally upon ECB is the same basic reason Christine Lagarde & Co did a strangely contradictory rate cut coupled with a price outlook hike and zero forward pathway outline (i.e. a net-neutral hawkish cut + ambiguity) - because she/we are all about to walk into a land mine littered week of potentially drastic cross-asset market moving catalysts AND policies (and, dare I say, EU political electorate developments and the need to potentially dust off their not yet used Italian BTP - German Bund “yield-spread-control” in time as well). And for that reason, I don’t blame her (I blame her for guaranteeing an unconditional June rate cut, but not for the muddled, contradictory outlook) - in fact, if she were to be fist-pounding decisively anything last week heading into this week, that would be very concerning of her judgement as one of the single most powerful individuals in the world. Don’t prematurely re-corner yourself into a self-forced policy decision (whatever it may be) like you just did with June cut again.
Perhaps the biggest wildcard for Lagarde and for all of us is the major central bank to end this week- Bank of Japan. In fact, it definitely is the wild card relative to the Fed, who, apparently after Friday's nonfarm payrolls, just got "June/July (and even September for some) taken off the table." And regardless of any one meeting scenario in the modern central banking era, BOJ will always be the wildcard relative to FOMC and ECB.
Over the coming days, I will be releasing a series of pieces on the JGB markets and Bank of Japan from various angles- and what each of the items in the calendar listed above mean and why it is that they are each potential market moving trigger catalysts. These are not just in preparation for "wildcard BOJ Friday” - but are broadly applicable thereafter, regardless of what does or doesn't come from June'24 BOJ.
In this article we will first take a look at how surging, then diving yields on JGBs had lifted and dropped US yields alongside in this post-yentervention era - the latest "why you should care.” And if you already do care, the Asia perspective and approach to these same markets we all share.
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