Futures Weaker, FOMC Delivers No Surprises

In post-Tokyo trade, JGB futures are cheaper, closing -25 compared to settlement levels, after US tsys finished flat to 4bps richer across the major benchmarks, with a flattening of the curve, following a muted reaction to the Fed raising rates 25bp to a 22-Year high. US tsys firmed off session lows as Fed Chair Powell emphasised data dependency for further hikes in the press conference. Also, in the press conference, Powell reiterated signs of progress in the labour market balance and noted the potential impact of tighter credit conditions.

• FOMC-dated OIS suggests little net change in near-term meeting expectations, with +5bp for Sep and a cumulative +11bp for Nov to a terminal 5.44%. That suggests the markets see an almost 50/50 chance of the second hike that the median FOMC participant pencilled in with the June dots.
• Today the local calendar sees International Investment flow data (Jul 21) ahead of Tokyo CPI and the BoJ Policy Meeting on Friday.
• Industrial Profits from China headline an otherwise thin docket in Asia. Further out we have US GDP, durable goods orders, initial jobless claims and wholesale inventories.
• Today also sees the MoF sell Y2.9tn 2-year JGBs.