JGBS: Futures Unchanged Overnight, 40Y Supply Due

In post-Tokyo trade, JGB futures closed XX, X compared to settlement levels, after US tsys finished on Friday ~8bp richer across the 2- to -10-year maturities. 

• Headline risk trumped data ahead of the weekend. Early Friday headlines suggested some thawing in US-China relations. An interview with President Trump was published in which he said he and China's Xi had been in contact, while the Chinese were considering easing tariffs on some US imports.
• However, President Trump tweeted later that he "Won't Drop China Tariffs Unless They Give Us Something", followed by "People Are Starting To Understand How Good Tariffs Are".
• Gains in US tsys were pared slightly after higher than expected UofM sentiment & current conditions data. Overall 1Y inflation expectations were revised to 6.5% (prelim 6.7%) in the final April release for a still large acceleration from 5.0% in March and its highest since 1981.
• Liquidity across financial markets, including the Treasury market, deteriorated after President Trump's April 2 reciprocal tariffs announcement, but market functioning was generally orderly, according to the Federal Reserve's semiannual report on financial stability, released Friday.
• Today, the local calendar will be empty ahead of tomorrow’s holiday and Thursday's BoJ Policy Decision. 

• Bank of Korea to Sell KRW500bn 91-Day Bonds
• South Korea to Sell KRW1.8tn 2-Year Bonds
• Philippines To Sell PHP 8.0Bln 91D Bills (PH0000058935)
• Philippines To Sell PHP 8.0Bln 182D Bills (PH0000059404)
• Philippines To Sell PHP 9.0Bln 364D Bills (PH0000060279)
• Singapore to Sell S$1.8 Billion Bonds Due 2054

The range Friday night was 143.23 - 144.04, a relatively quiet end to the week considering. Risk is attempting to find a base and move higher as the Trump administration moves to de-escalate tensions. This opens the consensus lower USD trade to further pressure but overall the market believes this could be fleeting and will look to add to shorts on any meaningful bounce.

• (Bloomberg) -- “President Donald Trump suggested Sunday that his sweeping tariffs would help him reduce income taxes for people making less than $200,000 a year, as public anxiety rises over his economic agenda.”
• US Treasury Secretary Bessent stated that US trade talks, especially with Asia are “moving along very well” in an interview with ABC.
• (Bloomberg) -- “Toyota Motor Corp. Chairman Akio Toyoda has proposed a buyout of Toyota Industries Corp., people familiar with the matter said, seeking to consolidate his grip on Japan’s biggest business empire as a wave of merger and acquisition activity roils the country.”
• On the day the 143 handle should continue to see some supply, then more importantly the 145/146 area should once more offer good levels for sellers to reengage. 
• CFTC data shows Asset managers continuing to add to JPY longs, leveraged funds are now also beginning to build longs.

Fig 1 : USD/JPY CFTC Holdings

Source: MNI - Market News/Bloomberg