Futures Down Tick in Overnight Trade, US Debt Ceiling Negotiations Continue

JGB futures push to their lowest level since May 10 before bouncing with US tsys in post-Tokyo trade, closing -2 compared to settlement levels.

• The US tsy 10-year yield declined 2bp to 3.69% after reaching a peak of 3.76% overnight, marking a new high for the past two months. The curve has flattened, with the 2-year rate 1bp higher at 4.32%.
• Risk appetite declined due to ongoing concerns about the unresolved debt ceiling negotiations, which continue to dominate headlines. Republicans have stood firm on their stance against any tax changes, making a deal elusive, as emphasised by McCarthy, while Democrats strive to increase revenues and reduce spending.
• According to MNI’s technical team, the strong recovery in JGB futures from 147.27, the Apr 18 low confirms the corrective nature of the recent pullback, keeping medium-term attention on 149.53, the March 22 high and the bull trigger.
• In terms of global data, the PMI indicators continued to illustrate a two-speed economy, with manufacturing indices further deteriorating and entering contractionary territory, while services indices demonstrated continued upward momentum for both the Euro area and the US.
• Today will see BoJ Rinban operations covering 1- to 25-Year JGBs along with Machine Tool Orders (April final).