Futures Downtick, US Tsys Weaker, No Progress on Debt Ceiling Deal

During post-Tokyo trading, JGBs futures experienced a slight decline, closing -6 compared to settlement levels. This decrease followed a 4-11bp cheapening in cash US tsys, resulting in a steeper yield curve. The pressure on US tsys persisted until the end of the trading day due to the lack of progress in resolving the US debt impasse on Wednesday.

• The release of the minutes from the May FOMC meeting revealed a division among officials regarding their support for further interest rate hikes, emphasising the importance of maintaining flexibility.
• Recent statements from Fed Bostic emphasised the Fed's intention to avoid committing to specific rate adjustments and instead rely on data to guide their decision-making process. Earlier during the NY session, Fed Waller expressed his inclination towards a rate hike in June, citing limited progress in curbing inflation.
• Fitch has placed the US on negative ratings watch, as the deadline for an increase in the debt-ceiling approaches (June 1) and they see US governance as weaker than other AAA rated nations.
• The local economic calendar sees Weekly Security Investment Flow data slated ahead of Tokyo CPI tomorrow.
• The MoF plans to sell Y700bn of 40-year JGBs today. Sale of 40-year debt is expected to go smoothly supported by life insurers’ plans to increase holdings of domestic bonds this fiscal year. The yield on the 40-year JGB rose 1.5bp to 1.435% yesterday.