JGBS: Futures Weaker Overnight Ahead Of Natl CPI Data

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.”

NZGBs are 3-6bps cheaper after US tsys finished with heavy losses, yields 6-9bps higher, as markets evaluated risk sentiment the day after Gulf allies asked Pres Trump to called off planned attack on Iran. US tsys yields rose to new cycle highs Tuesday. 

• Early selling accelerated following reports reports of "explosions heard in Qeshm Island, cause unknown" Reuters, while the US Senate expected to hold 8th Iran War powers vote this afternoon.
• 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.
• 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.
• Swap rates are 4-5bps higher.
• RBNZ-dated OIS pricing is little changed across meetings. 6bps of tightening is priced for May, while February 2027 assigns 102bps.
• The local calendar will be empty.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 1.50% May-31 bond and NZ$200mn of the 4.25% May-36 bond.

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