Futures Cheaper As BoC Hike Sparks Global Bond Weakness

In post-Tokyo trade, JGB futures are significantly weaker, closing -24 compared to settlement levels, after US tsys finished 7-14bps cheaper across the major benchmarks with the belly leading the weakness.

• US tsys faced downward pressure from the BoC’s surprise 25bp interest rate hike. The 10-year yield reached its highest level since the passing of the debt ceiling bill in Congress.
• The US Tsy provided guidance on plans to increase the issuance of bills to continue financing the government and to rebuild the cash balance to a level in line with policy. Despite being well-flagged the announcement weighed on the short end of the curve.
• A Bloomberg survey stated that more than 90% of economists expect no change from the BoJ at next Friday's policy announcement. This is down from the previous survey. July is seen as more likely for a YCC tweak (see this link).
• On the data front today, we have final Q1 GDP revisions, which should firm on better business spending. Also out are April trade data, May bank lending and weekly investment flows. Later is the Eco Watchers survey for May.
• The MoF plans to sell Y500bn of JGBs with 5-15.5 years until maturity in a liquidity enhancement auction today.