Futures Stronger Overnight After US CPI Data & The FOMC Decision

In post-Tokyo trade, JGB futures are stronger, closing +13 compared to settlement levels, after US tsys finished sharply stronger but off their best levels.

• Softer than expected US CPI data contributed to large moves ahead of the FOMC.
• Core inflation increased by 0.2% m/m, below expectations for a 0.3% gain. This took the annual core rate to 3.4%, the slowest pace in more than three years. Super core services inflation ex housing declined marginally and was the first negative reading since September 2021.
• US tsys, however, finished off their best levels after the June FOMC meeting was hawkish versus expectations. Overall, the theme portrayed by the meeting communications is that rate cuts are being delayed, but they are still expected by year-end, and the ultimate destination hasn’t changed. (See MNI Fed Review here)
• Today, the local calendar will see Weekly International Investment Flow data and Q2 BSI Large Company Survey results. The MoF will also conduct a Liquidity Enhancement Auction for OTR 15.5-39-year JGBs.
• Looking further ahead, we anticipate the BoJ will maintain its policy rate on June 14. Nevertheless, we expect a generally hawkish tone at the meeting, indicating the possibility of additional policy tightening in subsequent meetings, possibly as soon as July. (See MNI BoJ Preview here)