Futures Downtick At Lunch, US Tsys Cheapen As Debt Ceiling Bill Passes The House

At the Tokyo lunch break, JGB futures have weakened to 148.56, -4 compared to the settlement levels, more than unwinding the overnight uptick that printed a high of 148.69.

• Outside of the previously outlined economic data beats from Q1 capex and company profits, the other noteworthy domestic factor to consider is weekly investment flow data for the week up to 26 May. The data revealed a reversal in foreign buying of Japan bonds, with a net outflow of -¥646.6bn. This comes after two consecutive weeks of strong inflows. Japan's buying of foreign bonds continued to show strength for the second consecutive week.
• Elsewhere, the US House of Representatives has voted to lift the US debt ceiling by 314-117. The bill now goes to the Democrat-led Senate and President Biden has urged it to pass the agreement as soon as possible. In terms of the Senate, Bloomberg is reporting that several senators have said that they won’t allow the legislation to pass quickly.
• Cash US tsys have softened after the announcement with the early Asia-Pac session richening of 1-3bp turning into a 2-4bp cheapening.
• Cash JGBs have held their twist steepening at the Tokyo lunch break with yields 0.5bp lower to 1.7bp higher.
• The benchmark 10-year yield is 0.6bp higher at 0.442%, showing no concession ahead of today’s supply.
• The swap curve bear steepened with rates flat to 1.6bp higher. Swap spreads are wider out to the 30-year zone.