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Futures Stronger With US Tsys, 30-Year Supply Today


In post-Tokyo trade, JGB futures are stronger, closing +8 compared to settlement levels, after US tsys finished 1-3bps richer across the major benchmarks yesterday with a light steepening observed. Tsys firmed off session lows as May ISM Services were weaker than expected, printing its lowest level since December 2022. The Prices Paid component dropped to its lowest level since May 2020 and the Employment component fell below 50 for the first time since December.

  • FOMC dated OIS price ~6bp hike into next week's meeting with a terminal rate of ~5.25% in July. There are ~25bps of cuts priced for 2023.
  • Bloomberg writes that the scourge of negative-yielding debt refuses to go away for investors as the Bank of Japan’s continued reluctance to roll back quantitative easing has pushed some local yields back below zero. Japanese bonds make up all of the global negative-yield index. (link ICYMI)
  • On the data front, April Labour cash earnings undershoot expectations printing +1.0% y/y (+1.8% est.) versus 1.3% prior, while real earnings print -3.0% y/y (-2.0% est.) versus -2.3% prior. Household spending also surprised on the downside, printing -4.0% y/y (-2.4% est.) versus -1.9% prior.
  • The MoF plans to sell Y900bn of 30-year JGBs today.

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