Cheaper In Overnight Dealings Ahead Of Weekend, US Tsys Pressured Into Qtr-End

In post-Tokyo trade ahead of the weekend, JGB futures were sharply weaker, closing -29 compared to settlement levels, after US tsys finished the week, month and quarter on a bearish note despite bond-friendly data.

• It appeared month/quarter-end positioning outweighed Friday's dovish reaction to Core PCE inflation that was on balance a little softer than expected in May, printing 0.08% m/m vs consensus of 0.1% that had tilted higher with an average unrounded 0.13% m/m.
• The long end of the Treasury curve underperformed in a bear steepener as duration was shed right into the close. The US 10-year finished 11bps cheaper at 4.40%. The 2-year yield was up 4bps to 4.75%.
• The spread between French and German 10-year bonds widened to 84bps, which is the highest level since 2012, before retracing ahead of the first round of voting in France’s elections.
• According to exit polls, the first round of voting for France’s National Assembly has produced results broadly in line with surveys.
• Today, the local calendar will see the Tankan survey for Q2, with a relatively steady outcome, expected relative to Q1 (11 for large manufacturing). Also out is the final PMI read for June.