Futures Stronger Overnight With US Tsys Following FOMC Decision

In post-Tokyo trade, JGB futures are sharply higher, closing +31 compared to settlement levels, after US tsys rallied strongly as Fed Chair Powell’s post-FOMC decision comments lean marginally to the dovish side. Fed Chair Powell left the door open to a rate cut at the next FOMC meeting in September provided the next two CPI reports give no cause for alarm.

• A late surge saw projected rate cut pricing into year-end strengthen vs. early Wednesday levels: Sep'24 cumulative -28sbp, Nov'24 cumulative -47bps, Dec'24 -72bps.
• US tsys also saw additional support from a haven bid on reports Iran is preparing a direct strike on Israel. Month-end, no surprises from the Treasury refunding and technicals also pushed yields to their lowest levels since early February. The US 2- and 10-year yields finished ~10bps lower.
• Commodities surged on geopolitical risks, with oil jumping 5% and gold popping ~1.5%.
• Overnight's price action is in sharp contrast to yesterday’s heavy session prompted by the out-of-consensus BoJ rate hike. The BoJ appeared to prioritise solid inflation numbers over signs of slack demand in the economy.
• Today, the local calendar will see Weekly International Investment Flow and Jibun Bank Mfg PMI data.