Cheaper After Fed Chair Powell’s Comments, Trade Balance Data

In post-Tokyo trade, JGB futures are weaker, closing -17 compared to settlement levels, after global bond markets remained under pressure amid ongoing repricing of the FOMC policy trajectory. The market is pricing less than 40bps of Fed rate cuts for this year.

• Fed Chair Powell’s "lack of further progress on inflation" comment added to the sell-off. US tsys yields made fresh YTD highs. The 2-year yield cheapened 7bps to test 5.0%. The 10-year rate also finished 7bps higher at 4.67% after reaching 4.694%.
• Rates bounced slightly off weaker levels following lower than expected Building Permits (1.458M vs. 1.510M est), m/m (-4.3% vs. -0.9% est) and Housing Starts (1.321M vs. 1.485M est), m/m (-14.7% vs. -2.4% est).
• Little reaction to in-line Industrial Production m/m (0.4% vs. 0.4% est, prior up-revised to 0.4% from 0.1%), Capacity Utilization (78.4% vs. 78.5% est, prior up-revised to 1.2% from 0.8%).
• The DXY was firmer on Powell's comments amid expectations the ECB, the BoC, and possibly the BoE could cut before the Fed. USD-JPY also edged up on expectations the BoJ will remain accommodative.
• Today, the local calendar sees Trade Balance data alongside BoJ Rinban operations covering 1- to 25-year JGBs.