Markets
While upward pressures on oil prices eased throughout yesterday, (natural) gas prices continued to add to recent gains. Dutch TTF future price hits €50/MWh for the first time in a month, up 25% from recent lows (Which in turn were about a third higher than pre-war levels). This followed reports from major producer Qatar, which had temporarily halted its efforts to increase LNG production over concerns that transit through the Strait of Hormuz was not safe. Gas is an important component of the eurozone’s energy mix and features as prominently in ECB discussions as oil. However, markets were encouraged by the latter’s price developments over the past 24 hours. Core bonds recovered from their shock on Wednesday, sending German yields down by as much as 6 basis points on the front end. The ECB’s October interest rate hike is still fully considered. Longer maturities ended flat after posting additional marginal gains earlier in the day. Government bonds outperformed government bonds, with UK yields falling 6.7-9 basis points across the curve. The US Treasury yield curve also steepened, correcting downward by 0.8-4.5 basis points. A $22 billion 30-year auction was halted yesterday as demand metrics strengthened, helping push bonds higher, albeit temporarily. Stock markets rebounded led by technology companies (Nasdaq +1.3%) and kept the US dollar slightly on the defensive. The DXY finished below 101. EUR/USD rose slightly higher north of the big 1.14 figure. The USD/JPY pair stabilized around 162+ levels. However, the yen took the lead in Asian trading this morning. The pair is pushing downwards towards the 161.5 level. This came after news followed by the Japanese government The measures would include one of the world’s largest pension funds making much larger investments in Japanese financial assets (see below). It leads to some of the biggest moves overnight (including in the JGB). Other news limited. The United States said technical talks with Iran are continuing, which may ease some fears of the conflict escalating again into all-out war. However, it is nothing new. After President Trump considered that the ceasefire had ended for him, he kept the door open for talks, leaving it to the negotiators to do what they saw fit. Brent crude rose slightly to $76. Today’s environmental calendar is completely empty. In technical and perhaps uninspiring trading heading into the weekend, we are watching the long end of the curve which looks like it could easily be catalyzed into a rise in yields but not as much into a decline.
News and opinions
Japanese Finance Minister Satsuki Katayama said the government wants the country’s pension funds to significantly raise their investments in domestic assets. Fin Min made this goal clear when she assessed that the government wants to “ensure that the public directly benefits from Japan’s economic growth.” From a market perspective, it would be particularly important for Japanese financial markets if this happened Government Pension Investment FundThe company, which manages 293.6 trillion yen (about $1.8 trillion), will allocate more of its investments to domestic markets. At least the Japanese markets performed positively This morning with the Nikkei rising 1.7%. Long-term Japanese bonds have rebounded after a difficult period recently (10-year JGB -9.6 basis points; 30-year JGB -7.3 basis points). Even the yen rebounded from USD/JPY 162.4 to USD/JPY 161.5. For Japanese data Japan’s Producer Price Index for June was 0.4% m/m and 7.1% y/y (From 1.1% and 6.6% in May). The y/y scale was Highest since spring 2023. This type of cost passing still supports the case for continued policy normalization.
Inflation in Mexico fell for the third straight month in June. Headline inflation fell by 0.27% m/m, slowing y/y inflation from 3.94% to 3.37%, the lowest figure since early 2021. Core inflation was 0.24% m/m and 4.03% y/y (from 4.19%). The Mexican Central Bank has an inflation target of 3% with a tolerance band of 1 ppm. The bank published the minutes of its decision issued on June 25, when it left the interest rate unchanged at 6.5% in a unanimous decision. The decision came unchanged after a 25 basis point cut in May. The bank considered it appropriate to keep the interest rate at the current level It is expected to remain at this level for some time to comeeven as he discussed the upside inflation risks, especially in the services sector. He considered that the recent decline in inflation was driven by non-core components. After steadily rising throughout most of 2025, the peso has remained strong over the previous months in a fairly narrow range between USD 17.1/MXN 17.7.
