US TSYS: Cash Open

TYU5 is trading 110-20, up 0-00+ from its close. 

• The US 2-year yield opens around 3.96%, up 0.01 from its close.
• The US 10-year yield opens around 4.4185%, up 0.02 from its close.
• MNI FED WATCH: Rates Steady As Tariffs Lift Inflation Forecast. Federal Reserve officials are expected to hold interest rates steady Wednesday for a fourth straight meeting and mark up their inflation and unemployment forecasts as President Trump's tariffs begin eating away at growth. Fed Chair Jerome Powell and his colleagues maintain that monetary policy is "in a good place" to wait until later in the year before deciding on any policy moves.
• “Crude is likely to open sharply higher after Israeli strikes on Iranian energy infrastructure force markets to reassess geopolitical risk. While the attacks have spared export routes so far, the targeting of South Pars, Iran’s largest gas facility, can raise concerns about energy security and supply, and that’s likely to push more risk premium into prices at the open.”(BBG)
• The 10-year yield has bounced strongly off its 4.30/35% support, this area needs to hold if yields are to move higher. A sustained break back below 4.30% and you would think more shorts will be pared back potentially putting a short-term top in place. It seems traders for the moment are more concerned with the move in oil and the implications it has for inflation than buying treasuries as a safe haven.
• Data/Events: Empire Manufacturing

Natural gas rose over 3% on Friday following Israel’s attack on Iranian nuclear sites. Over the weekend the situation escalated with Israel targeting Iran’s oil and gas infrastructure, which will be lengthy to repair and rebuild.

• Israel struck Iran’s Fajr Jam Gas Refinery and South Pars gas field, which is one of the largest in the world and platform output has been temporarily stopped, according to The Australian. Iran has the second largest natural gas reserves and produces around 6% of global output but is not a major LNG exporter.
• The risk is that it retaliates by closing the Strait of Hormuz which 20% of global seaborne LNG transits through including from Qatar, the third largest exporter in 2024. Rabobank said that a disruption on this scale could push gas prices to EUR 100. Europe has become less reliant on Qatari LNG due to the risks of shipping through the Red Sea.
• US gas rose 3.4% to $3.61 on Friday to be up almost 5% this month. It fell to $3.50 before rallying to $3.67. It is currently up 2.5% to $3.67 in today’s session. Temperatures are forecast to be above average next week. US lower-48 output rose 3.2% y/y on Friday while demand fell 5.2% y/y.
• European prices rose 3.8% to EUR 37.57 but off the intraday high of EUR 38.58. It is now up almost 10% in June and the risks to global supplies from the Israel/Iran conflict is likely to push them higher as European refilling has a long way to go ahead of the coming winter.
• Bloomberg reported that the European Commission will on Tuesday propose a plan to end the EU’s reliance on Russian gas by end 2027. It would be gradual starting in January 2026 and would also include a ban on services to Russian companies at EU LNG terminals.

In post-Tokyo trade, JGB futures closed weaker, -32 compared to settlement levels, after US tsys finished last week on a weak note despite evidence that the conflict between Israel and Iran is escalating.

• (MNI) Israeli officials estimate fighting with Iran, "could stretch for two to three weeks, with more strikes on tap." Ynet notes that Israeli Prime Minister Benjamin Netanyahu, "is expected to speak on Friday with U.S. President Donald Trump
• In early Monday trade, the knee-jerk reaction in major asset classes has been risk-off (ex-weaker yen), with a focus on oil prices. For the oil benchmarks, we sit off session highs. That said, both benchmarks are still up over 2%, as Israel started targeting Iran's energy facilities. US tsy futures are little changed.
• The BoJ is expected to keep its policy rate unchanged at 0.50% at its June 16–17 meeting, with focus turning to whether it will slow the pace of its JGB purchase reductions. The BoJ is likely to outline its bond-buying schedule through Q1 2027 to provide more transparency while maintaining flexibility. Markets see little risk of a rate hike at this meeting, with a projected policy rate of 0.60% by December.
• The local calendar will be empty today, ahead of the BoJ Policy Decision on Tuesday.