Futures Bounce Off Key Support, Richer With US Tsys After US CPI Miss

In post-Tokyo trade, JGB futures are richer, closing +25 compared to settlement levels, after US tsy yields shunted lower on softer than anticipated US CPI data.

• The 2-year US tsy finished 13bp richer at 4.746% versus an intraday peak of 5.112% after ADP. The 10-year yield was 11bp at 3.857%. The 2/10 cash yield curve steepened by 2bp to -88bp. As a reference, the curve hit an intraday level of -110bp after the ADP last week.
• Some moderately hawkish Fed speak from Barkin ("comfortable with more hikes") and Kashkari ("entrenched inflation could prompt Fed to hike further") did little to stem the post-data rally in US tsys. Reminder, Fed goes into policy blackout this Friday at midnight.
• Bloomberg reports that Japan bond bears may be in for disappointment as the central bank’s policy decision looms later this month. (See link)
• Today the local calendar sees International Investment Flow (Jul 7) along with 20-year supply. The 20-year JGB auction today takes place after 30-year JGB supply in early July saw relatively poor digestion. The low price failed to meet dealer expectations and the cover ratio ticked down to its lowest level since March. The 30-year auction tail was also significantly longer than recent auctions, rising to the highest level since Apr-2020.