Futures Sharply Lower Overnight, US Curve Twist-Steepens, PPI Services Data Due

In post-Tokyo trade, JGB futures are sharply weaker, closing -25 compared to settlement levels, after US tsys finished the NY session with a twist-steepening of the curve. The US 2-year yield finished 6bps lower at 4.43% versus a 3bps rise for the US 10-year.

• Short-end rates were well bid after former NY Fed President Dudley suggested rate cuts were warranted now, not later in the year. Projected rate cut pricing into year-end strengthened from yesterday's levels: Sep'24 cumulative -27bps (-25bps), Nov'24 cumulative -43bps (-40bps) and Dec'24 -65bps (-63bps).
• Equity sentiment slumped in the US, with the Nasdaq down by over 3.6%, amid tech earning concerns. CHF rallied in tandem with JPY, adding more evidence to the argument that carry-trade dynamics that dominated much of this year's currency trade are starting to reverse.
• Softer flash manufacturing PMIs for July (US down to 49.5) increased global growth concerns.
• We also had a Reuters report that a BoJ hike will be considered next week, while the central bank will also announce plans to halve bond purchases over the next few years (see link).
• Today, the local calendar will see PPI Services, Weekly International Investment Flow and Department Store Sales data ahead of Tokyo CPI on Friday.