Futures Heavy, Pressured By US Tsys, 30-Year Supply Tomorrow

JGB futures are trading on a low note, currently standing at 148.54, -28 compared to the settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Jibun Bank Services and Composite PMIs.
• Accordingly, local participants are likely to have been on headlines and US tsys watch as they digest the sharp post-payroll sell-off on Friday. Cash tsys are 1.5-4.1bp cheaper with tsy futures at 113-19, -8 versus NY closing levels.
• US Treasury yields seem to be under pressure due to the imminent risk of increased debt issuance following months of disruption, as President Biden signed legislation to suspend the federal debt ceiling. (link)
• The strength of May price rises will lead the BOJ and Governor Kazuo Ueda to make a tough call on yield curve control. (link)
• Cash JGBs are cheaper with yields higher beyond the 2-year zone. Yields are 0.3-2.6bp higher across benchmarks with the futures linked 7-year zone leading. The benchmark 10-year yield is 1.7bp higher at 0.431%. The 30-year JGB yield is 0.7bp higher at 1.281% ahead of tomorrow’s supply.
• The swaps curve bear steepens with rates 0.3bp to 2.6bp higher and swap spreads wider.
• The local calendar tomorrow sees April’s Labour Cash Earnings and Household Spending along with 30-year supply.