Futures Cheaper With US Tsys On Debt Ceiling Deal Optimism

In post-Tokyo trade, JGB futures are cheaper, closing -16 compared to settlement levels, after US cash tsys finished flat to 7bps cheaper with the curve flatter. US tsys faced pressure due to improved risk appetite, reflected in a 1.2% rise in the S&P500. The market anticipated a resolution to the debt ceiling issue.

• US tsys rebounded from its lowest point as the latest 20-Year supply auction showed strong participation from indirect buyers.
• FOMC dated OIS now implies approximately 60bp of interest rate cuts in 2023, a decrease from the roughly 100bp priced last week.
• MNI's technical analyst reports that the JGB futures' continued appreciation indicates an extension of the present short-term bull cycle. Investors are now focusing on the March 22 high of 149.53.
• According to a Bloomberg article, ING believes that better-than-expected economic expansion in the first quarter supports the view that the BoJ will adjust its yield-curve control policy at its monetary policy meeting in June. (link here)
• The local calendar sees the release of April Trade, weekly International Security Flow (May 12) and April Tokyo Condominium For Sale data.
• BoJ Rinban operations covering 1-10-year and 25-Year+ JGBs along with an auction of Y3.5tn 12-month bills are also slated for today.