JGBS: Futures Rally Overnight, US Tsys Rally, Natl CPI Slightly Beats

The range on Tuesday was 139.89 - 141.67, price opened very bid and has raced to print a high of 143.22 so far. A big bounce in US stock futures and then a second leg higher in Asia as Tesla shares rally up to 7% during its earning call as Elon Musk says he is to pull back significantly from DOGE.

• Treasury Secretary Bessent Tuesday privately told investors the tariff standoff is unsustainable and he expects de-escalation with China. Trump added with comments later from the White House stating that final tariffs on China would not be 145%, while also stating he has no intention of firing Fed Chair Powell (which has been a worry for markets in recent weeks).  
• (Bloomberg) -- “Nomura Holdings Inc. is telling clients to stay invested through the turmoil that’s pervaded financial markets during the escalating trade tensions. With its $1.8 billion acquisition of an asset management business, the Japanese brokerage is putting its money where its mouth is.”
• Risk has managed a significant bounce and the follow through in Tesla after the close has seen USD/JPY shorts quickly pared back after its failure to sustain a break sub 140.00.
• The consensus view has quickly changed now to a short USD bias, should risk actually manage a decent rally these holdings will be challenged.
• On the day sellers should emerge first up around 143, then more importantly the 145/146 area should once more offer good levels for shorts to reengage.
• CFTC data shows Asset managers continuing to add to JPY longs, while leveraged are only just starting to get long, they will be waiting for a decent bounce to add.
• USD/JPY: upcoming notable strikes, 140.00($1.61b), 145.00($1.38b)  Exp Apr 24 NY cut(Source DTCC)
• Data : Jibun Bank Japan Mfg, Services PMI, US S&P Global Services & Manufacturing PMI

Fig 1 : USD/JPY Daily Chart

Source: MNI - Market News/Bloomberg 

In post-Tokyo trade, JGB futures closed weaker, -11 compared to settlement levels, after US tsys finished modestly mixed on Tuesday.

• US curves unwound a large portion of Monday's steepening, with bonds outperforming weaker short-end rates as markets reassessed tariff-tied risks to global trade and the Trump Administration's efforts to meddle with the Federal Reserve's independent policymaking.
• Unwinding of haven demand and a poor 2-year auction saw the yield close 6bps higher at 3.82%. The long end was in the green all session, and the 10-year yield was 1bp lower at 4.40%.
• Europe’s return from its extended Easter holiday improved market depth.
• Risk-on sentiment extended into today’s Asia-Pacific session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence). Such fears had weighed on broader US asset-related sentiment.
• Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
• Today, the local calendar will see Jibun Bank PMIs and the Tertiary Industry Index. PPI Services is due on Thursday.

In local morning trade, NZGBs are flat to 2bps cheaper, with a steeper curve, after US tsys finished mixed on Tuesday. 

• US curves unwound a large portion of Monday's steepening, with bonds outperforming weaker short-end rates as markets reassessed tariff-tied risks to global trade and the Trump Administration's efforts to meddle with the Federal Reserve's independent policymaking.
• Brief midday risk-on move extended after headlines that Tsy Sec Bessent (speaking at a JP Morgan event in DC - closed to public and media) saw the China tariff standoff as unsustainable and expected a de-escalation to occur. The bloom quickly came off the rose as sources clarified the gist of negotiations would be a "slog".
• Risk-on sentiment has extended into today’s Asia-Pac session after US President Trump stated that he had no intention of firing Fed Chair Powell.
• Trump also stated that the final tariff number for China wouldn't be near the current 145%.
• Swap rates are flat to 3bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is showing 27bps of easing priced for May, with a cumulative 79bps by November 2025.
• Today, the local calendar will be empty.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$250mn of the 4.25% May-36 bond.