US TSYS: Futures Re-Open Little Changed, No Cash Trading Today

In post-Tokyo trade, JGB futures closed higher, +5 compared to settlement levels, after US tsys finished with heavy losses, yields 6-9bps higher, as markets evaluated risk sentiment after Pres Trump to called off planned attack on Iran. 

• Late risk-off moves after the WSJ reported the "US SEIZED IRAN-LINKED OIL TANKER IN THE INDIAN OCEAN" .. "MEDIATORS SEE LITTLE PROGRESS IN IRAN-US TALKS .. CITES REGIONAL MEDIATORS, US OFFICIALS ON IRAN TALKS" WSJ.
• MNI US-JAPAN: Bessent - "I am confident that Governor Ueda will successfully guide Japan's monetary policy, and I believe the fundamentals of the Japanese economy are strong and that excess FX volatility is undesirable."
• MNI: US monetary policy is "in a good place" to respond to various scenarios for inflation and jobs, and market pricing for the potential for a long hold or even modest tightening is reasonable, Philadelphia Fed President Anna Paulson said Tuesday.
• Today, the local calendar will see 20-year supply.
• (Bloomberg) "Open interest levels are running at the highest levels since August 2024 as investors position for yields to continue their upward march. Although the JGB contract isn't an ideal hedge for this week's 20-year auction there is enough selling momentum across the curve to make it workable."

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ACGBs (YM -2.0 & XM -2.5) are modestly weaker after US tsys finished with heavy losses, yields 6-9bps higher. 

• Early selling accelerated following reports reports of "explosions heard in Qeshm Island, cause unknown" - Reuters.
• Markets remain wary of ongoing US/Iran war rhetoric: Tenuous Iranian reports that the Israelis had launched the drone strikes on UAE rather than Iran themselves (naturally, that report not repeated in western or Israeli media) as well as latest headlines that NATO could step in to assure passage of ships through Hormuz if the Strait is still closed in July.
• Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at +42bps.
• The bills strip has bear-steepened, with pricing flat to -3 across contracts.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 20% for June to 105% by September and 143% by December 2026.  
• Today, the local calendar will be empty.
• ICYMI, the AOFM announced yesterday that the issue by syndication of the new 5.00% 21 June 2036 Green Treasury Bond had been priced at a yield to maturity of 5.065%. The issue size is $7.5 billion in face value terms. There was a total of $24.4 billion of bids at the final clearing price.

US President Donald Trump is shortly due to deliver remarks at the White House Congressional picnic. LIVESTREAM The remarks come around an hour after polls closed in the Republican primary election in Kentucky, where Trump aggressively backed Ed Gallrein in a bid to unseat libertarian incumbent Thomas Massie (R-KY). 

• Massie has been a persistent thorn in the GOP agenda, consistently voting with Democrats on the Iran war powers, voting against GOP government funding measures, and leading a bipartisan push for the disclosure of files related to Jeffrey Epstein.
• Despite the animosity from Trump, Semafor notes that Massie has voted with Trump 81.5% of the time. Similarly, Senator Bill Cassidy (R-LA), who failed to reach a runoff in the Louisiana primary on Saturday after a Trump campaign to oust him, has a 100% record in voting with Trump, suggesting that Trump’s retribution is not motivated primarily by political ideology.
• Politico writes, “A Massie loss could essentially quash any internal GOP dissension as he moves into the lame-duck phase of his presidency. A win, however, could embolden Massie and other internal critics, further deepening intraparty fractures as Trump’s approval ratings slumps.”