JGBS: Futures Stronger Overnight With US Tsys On Fed Cut Hopes

In post-Tokyo trade, JGB futures closed unchanged compared to settlement levels, after US tsys finished Monday’s session 1-3bps cheaper. Focus is on Tuesday's June CPI inflation data and several Fed speakers ahead of Friday evening's policy blackout.

• (Bloomberg) - "The BOJ's next rate hike shouldn't come until next year, when officials have more information on the state of the economy, according to Japan Securities Dealers Association Chairman Takashi Hibino."
• "President Trump attacked the car trade imbalance between the US and Japan, saying "They sell us millions and millions of cars a year. We sell them no cars because they won't accept our cars." Prime Minister Shigeru Ishiba has said American cars are left-hand drive, large, and fuel inefficient, making them a tough sell in Japan." – BBG
• "Trump indicated he is open to more trade negotiations, including with the European Union: https://blinks.bloomberg.com/news/stories/SZE9AZDWRGG0, even as he insisted that his letters threatening new tariff rates are "the deals" for US trading partners." - BBG
• Today, the local calendar will be empty apart from 5-year Climate Transition supply.

ACGBs (YM flat & XM +1.0) are little changed after a relatively subdued start to a potentially volatile week amid myriad drivers, including inflation and sales data, earnings, and Fedspeak. 

• US equities opened slightly weaker after news of 30% levies on the EU and Mexico, effective August 1. However, the EU's willingness to talk, coupled with President Trump's openness to negotiation, helped calm concerns.
• (Bloomberg) -- "China's economy appears to have gained momentum in the three months through June. A rebound in exports after the trade-war truce with the US in mid-May has spurred related production and service sectors. Stimulus has also helped."
• Cash ACGBs are little changed with the AU-US 10-year yield differential at -7bps.
• The bills strip slightly weaker.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in August is given a 90% probability, with a cumulative 59bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• Today, the local calendar will see Westpac Consumer Confidence.
• The AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond today followed by A$800mn of the 4.25% 21 March 2036 bond on Wednesday and A$1100mn of the 1.00% 21 November 2031 bond on Friday.

In local morning trade, NZGBs are little changed after US tsys finished Monday’s session 1-3bps cheaper.

• Focus is on Tuesday's June CPI inflation data and several Fed speakers ahead of Friday evening's policy blackout. Consensus sees core CPI inflation at a seasonally adjusted 0.3% M/M in June on a rounded basis, but with a sizeable risk of undershooting at 0.2% (MNI median unrounded estimate at 0.24% M/M /average 0.25%).
• Cleveland Fed President Hammack (non-2025 voter, hawk) reiterated her patient approach to any future policy easing in an interview with Fox Business Monday. Hammack had previously cited a wide range of estimates of neutral rates from 2% to 4.6%.
• Bloomberg - "Jerome Powell made a formal request that the Fed's inspector general review its $2.5 billion building renovation."
• Swap rates are unchanged.
• RBNZ dated OIS pricing is little changed across meetings. 19bps of easing is priced for August, with a cumulative 34bps by November 2025.
• Today, the local calendar will be empty.
• On Thursday, the NZ Treasury plans to sell NZ$200mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 1.75% May-41 bond.