Futures Holding The Overnight Downtick, Debt Ceiling Talks Productive

JGB futures are holding the overnight downtick at 148.78, -4 versus settlement levels, in early Tokyo trade.

• Cash tsys are little changed across the major benchmarks in a muted start to Tuesday's dealing. A deal is one step closer following talks between President Biden and House Speaker McCarthy which have just finished. Comments from McCarthy indicate that the meeting was “productive” and that the tone of discussions had improved.
• May Preliminary Jibun Bank Services and Manufacturing PMI print higher at respectively 50.8 and 56.3 versus 49.5 and 55.4 in April. There has been no real market reaction to the data.
• Cash JGBs are modestly richer across the curve apart from the 1-year and 7-year zones, which are respectively 0.8bp and 0.2bp cheaper. The 40-year zone is outperforming on the curve with its yield 2.0bp lower ahead of the scheduled supply on Thursday. The benchmark 10-year yield is 0.7bp lower at 0.386%, well below the BoJ's YCC limit of 0.50%.
• Swap spreads are wider across the curve, beyond the 1-year zone.
• The MoF plans to sell Y250bn of 10-year index-linked JGBs today. Bloomberg reports that Mitsubishi UFJ Morgan Stanley Securities expects the supply to be absorbed smoothly given the debt is a new issue and the linker market is undervalued.