JGBS: Futures Higher Overnight With US Tsys, BoJ Policy Decision Tomorrow

In post-Tokyo trade on Friday, JGB futures closed weaker, -15 compared to settlement levels, after US tsys closed 3-4bps cheaper on Friday. 

• Core PCE inflation came in at 0.179% M/M unrounded in May after 0.136% in April (an upward rev from 0.116% prior), which was higher than expected (consensus roughly around 0.15%, implying a split between 0.1% and 0.2% rounded)) with a higher revision.
• Treasury Secretary Scott Bessent on Friday said one potential timeline for the announcement of a new Fed chair could come in October or November, playing down speculation that President Donald Trump may consider an earlier move to nominate a successor to Federal Reserve Chair Jerome Powell.
• Bloomberg - "Japan's Prime Minister Shigeru Ishiba emphasizes the need for speedy measures to ease inflation, while ensuring sufficient funds for social services like medical care, elderly care and pensions. Ishiba opposes cutting the sales tax, while the opposition proposes lowering the consumption tax on food to 0% to combat inflation."
• Today, the local calendar will see Industrial Production and Housing Starts.

ACGBs (YM -3.0 & XM _4.0) are weaker after US tsys finished last week moderately cheaper. Friday night, the US 10-year yield ranged from 4.2378% to 4.2906%, closing around 4.277%.

• Nevertheless, US tsys closed out a third-straight positive week, with the Bloomberg US Treasury index posted a 0.8% return for the week, driven by economic data points and speculation about a more dovish Fed chief.
• Treasury Secretary Scott Bessent on Friday said one potential timeline for the announcement of a new Fed chair could come in October or November, playing down speculation that President Donald Trump may consider an earlier move to nominate a successor to Federal Reserve Chair Jerome Powell.
• Cash ACGBs are 2-4bps cheaper with the AU-US 10-year yield differential at -11bps.
• The bills strip is -1 to -2 across contracts.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in July is given a 94% probability, with a cumulative 80bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• Today, the local calendar will see Melbourne Institute Inflation and Private Sector Credit.
• This week, the AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Wednesday and A$1000mn of the 2.25% 21 May 2028 bond on Friday.

In local morning trade, NZGBs are 1bp cheaper after US tsys finished Friday moderately cheaper. 

• Core PCE inflation came in at 0.179% M/M unrounded in May after 0.136% in April (an upward rev from 0.116% prior), which was higher than expected (consensus roughly around 0.15%, implying a split between 0.1% and 0.2% rounded)) with a higher revision.
• (Bloomberg) -- China firmly opposes any country reaching trade agreements with the US that would sacrifice Chinese interests in exchange for tariff relief, according to a statement from the Ministry of Commerce on Saturday night.
• * "If such a situation occurs, China will not accept it and will take resolute countermeasures to safeguard its legitimate rights and interests," an unidentified spokesperson was cited as saying in response to a media query about recent US trade talks with other nations.
• NZ monthly filled jobs in May increased by 1,689 jobs to 2.346 million jobs.
• Swap rates are 2-3bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is little changed across meetings. 4bps of easing is priced for July, with a cumulative 33bps by November 2025.
• Today, the local calendar will also see ANZ Business Confidence.