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Futures Weaker Overnight, May Core CPI Surprises On The Upside


In post-Tokyo trade, JGB futures are weaker, closing -11 compared to settlement levels, after global yields push higher due to central bank actions. The BoE delivered a hawkish surprise by hiking 50bp to 5.0%, bringing the total tightening this cycle to 475bp. The Norges Bank also surprised with a 50bp hike and maintained a tightening bias.

  • Little reaction to Fed Chairman Powell's second day of policy testimony to Congress and the lengthy Q&A that followed. Chair Powell reiterated the prevailing view that if the economy continues to perform as expected, it would be appropriate to raise rates again this year.
  • Cash tsy yields finished 6-9bp higher across major benchmarks with the 5-year leading.
  • Japan’s sovereign debt is emerging as the most appealing outside the US. That’s the finding of a Bloomberg analysis of 24 government bond markets globally based on 10-year yields, currency-hedge costs and volatility. (See link)
  • May National headline CPI prints in line with market expectations at 3.2% y/y, from 3.5%. The ex fresh-food and ex fresh-food and energy measures however surprise slightly on the upside at 3.2% y/y and 4.3% y/y respectively versus expectations of 3.1% y/y 4.2% y/y. The data might pressure yields higher at the Tokyo open.
  • Jibun Bank June preliminary PMIs and May department store sales are also out today.
  • Today will also see BoJ Rinban operations covering 1- to 25-Year JGBs.

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