JGBS: Futures Sharply Overnight, Cash Earnings Miss But HH Spend Beats

In post-Tokyo trade, JGB futures closed little changed, +2 compared to settlement levels.

• Volatility remained high overnight as tariff uncertainties continued to roil the markets as the reciprocal levies went into effect at midnight.
• Trump officials confirmed 104% added tariff on China went into effect at noon, with WH press sec Leavitt adding that additional tariffs are to be collected starting today.
• Concurrently, China vowed to "fight to the end". Notably, the PBoC yesterday allowed the offshore yuan to fall to a record low, testing 7.4153 versus the dollar.
• Wall Street finished with steep losses but edged off their lows into the close.
• US tsys finished mostly weaker, with curves twisting to the steepest levels in over three years (2s10s tap 55.157 high). The US long end was hit hard with the 30-year cheapening by 15bps. The 10-year was 11bps higher at 4.29%, while the 2-year yield richened 4bps to 3.73% on haven demand and rate cut bets.
• Today, the local calendar will see Consumer Confidence and Machine Tool Orders data alongside BoJ Rinban Operations covering 1-3-year and 5-25-year JGBs.
• BoJ Governor Ueda will also give a speech at the Trust Companies Conference (15:15 JT).

TYM5 is 111-17+, +0-02+ from closing levels in today's Asia-Pac session. 

• Overnight, US tsys finished mostly weaker as tariff headlines continued to rattle markets, with curves twisting to the steepest levels in over three years (2s10s tap 55.157 high).
• The long end was hit hard with the 30-year cheapening by 15bps. The 10-year was 11bps higher at 4.29%, while the 2-year yield richened 4bps to 3.73% on haven demand and rate cut bets.
• Trump officials confirmed 104% added tariff on China went into effect at noon, with WH press sec Leavitt adding that additional tariffs are to be collected starting tomorrow.
• US stocks failed to hold onto midmorning gains (SPX e-minis slipped below 5,000 after marking a session high of 5305.25 at midmorning).
• Heavy short-end buying partially swap-tied as spreads narrowed sharply, projected rate cut pricing rebounded vs. priors - back to pricing in a full point by year-end. Current levels vs. early morning (*) as follows: May'25 at -14bp (-8.2bp), Jun'25 at -38.2bp (-28.3bp), Jul'25 at -61.6bp (-49.1bp), Sep'25 -79.3bp (-65.7bp).

In local morning trade, NZGBs have bear-steepened, with benchmark yields 2-6bps higher, ahead of today’s RBNZ Policy Decision.  

• Overnight, US tsys finished mostly weaker as tariff headlines continued to rattle markets, with curves twisting to the steepest levels in over three years (2s10s tap 55.157 high).
• Swap rates are 1bp lower to 5bps higher, with the 2s10s curve steeper.
• The RBNZ is unanimously expected to deliver a 25bp cut to 3.50% and maintain its easing bias.
• Data have remained soft but still signal a gradual recovery, so the MPC is likely to ease in line with its February guidance. It is also the first meeting since Governor Orr unexpectedly resigned, and there is no reason to deviate from the message at this stage.
• There is likely to be little direct impact on NZ from the US’ 10% tariff on its exports, even though it is NZ’s second largest destination. However, the indirect impact of the 54% US tariff on imports from China is a significant concern, NZ’s largest trading partner.  (See MNI’s RBNZ Preview here)
• RBNZ dated OIS pricing is flat to 3bps softer across meetings. 28bps of easing is priced for today, with a cumulative 101bps by November 2025.