JGBS: Futures Slightly Weaker Overnight, PPI & BoJ SoO Due

USD/CNH tracks near 7.1750 in early Monday dealings. The pair reached the low 7.1700 region in Friday US trade, as broader USD sentiment faltered post fresh Trump tariff threats targeting the EU. Headlines have crossed this morning that Trump will extend the tariff deadline to July 9 for the EU (which were originally going to go into effect on June 1), which has seen US equity futures rise. The reaction in CNH has been modest though. Spot USD/CNY finished up Friday trade at 7.1810, while the CNY CFETS basket tracker edged slightly higher to 96.20, but was still down for last week. 

• Friday's move in USD/CNH to fresh YTD lows keeps focus in the pair firmly on the downside. We saw Nov 7-8 lows from last year with a 7.1400 handle. Sub that is the 7.1000 region, with early Nov 2024 the last time we were sub this level. On the topside, the 20-day EMA resistance point is trending down, last near 7.2200.
• The China to world equity ration is up from recent lows but still sub May to date highs. The CSI 300 ended Friday trade down 0.81%, while in US trade the Golden Dragon index was flat. Concerns around US trade/fiscal policy may continue to benefit China and other major markets in the near term.
• It's a quiet week data wise, with the April industrial profits print out tomorrow, then this Saturday we get the May PMI prints. The Citi CNY data surprise index sits just off cycle highs. Fiscal policy has ramped up to boost growth amid the tariff threat. The market consensus if for a slight uptick in the May official PMIs. 

In post-Tokyo trade on Friday, JGB futures closed stronger, +56 compared to settlement levels, after US tsys 

• US equity-index futures have climbed in early Asian trading after President Donald Trump extended a deadline on aggressive European tariffs. Trump agreed to delay the date for a 50% tariff on goods from the European Union to July 9 from June 1. US tsy futures (TYM5) have weakened in early Asia-Pac dealings, with TYM5 at 109-25, -0-09+ from closing levels. Cash US tsys are closed today for Memorial Day.
• US tsys ended Friday little changed. The US 10-year yield had a range of 4.4456% - 4.5409%, closing around 4.51%
• Bloomberg - "Japan's chief trade negotiator indicated he aims to resolve tariff talks in time for a June meeting between PM Shigeru Ishiba and Donald Trump on the sidelines of the G-7 gathering."
• FT - SoftBank's Masayoshi Son proposed a US-Japan sovereign wealth fund to invest in tech and infrastructure.
• Bloomberg - "President Donald Trump announced a partnership between US Steel Corp. and Japan's Nippon Steel Corp., which will keep US Steel in the US and create at least 70,000 jobs."
• Today, the local calendar will see Coincident/Leading Index data alongside an Auction for Enhanced-Liquidity 5-15.5 YR.

ACGBs (YM flat & XM flat) are little changed. 

• US equity-index futures have climbed in early Asian trading after President Donald Trump extended a deadline on aggressive European tariffs. Trump agreed to delay the date for a 50% tariff on goods from the European Union to July 9 from June 1. US tsy futures (TYM5) have weakened in early Asia-Pac dealings, with TYM5 at 109-26+, -0-08 from closing levels. Cash US tsys are closed today for Memorial Day.
• US tsys ended Friday little changed. The US 10-year yield had a range of 4.4456% - 4.5409%, closing around 4.51%.
• “In Australia, RBA Governor Michele Bullock will travel to China for meetings. While she is unlikely to reveal the content or tone of those talks, the visit perhaps underscores Australia's vulnerability should China's economy slow due to tariffs on its exports.” (per BBG)
• Cash ACGBs are little changed.
• A 25bp rate cut in July is given a 70% probability.
• The local calendar will be empty on Monday and Tuesday ahead of April's CPI on Wednesday.
• This week, the AOFM plans to sell A$400mn of the 4.25% 21 June 2034 bond on Tuesday and A$1200mn of the 4.25% 21 March 2036 bond on Friday.