JGBS: Futures Weaker Overnight, BOJ To Reaffirm Downside Risk To Growth & Prices

In post-Tokyo trade, JGB futures closed firmer, +9 compared to settlement levels, after US tsys finished slightly mixed ahead of today's key CPI data. The broad assumption is that May could have started seeing a greater tariff impact than April, but firmer increases are more likely to show in summer months. (See link)

• US Commerce Secretary Lutnick announced a framework has been reached to implement the Geneva Consensus, integrating it with outcomes from the June 5 leaders' call. The framework still requires approval from former President Trump. The goal is to boost trade with China, with expectations that issues like rare earths and magnets will be resolved. - [RTRS]
• Kyodo News via Bbg - "The Constitutional Democratic Party of Japan announced its manifesto for the summer House of Councillors election on the 10th. Under the slogan "We will protect you from rising prices," the manifesto clearly states that the consumption tax rate on food will be 0%. As a short-term measure until the tax cuts are implemented, the manifesto also includes the payment of a "dining table support grant" of 20,000 yen per person. The aim is to put measures to combat rising prices at the forefront and show the axis of conflict with the Ishiba administration."
• Today, the local calendar will see PPI data.

ACGBs (YM -5.0 & XM -3.0) are cheaper after US tsys finished Tuesday’s NY session slightly mixed ahead of today’s key CPI data. The broad assumption is that May could have started seeing a greater tariff impact than April, but firmer increases are more likely to show in summer months. (See link)

• LONDON - U.S. COMMERCE SECRETARY LUTNICK: WE HAVE REACHED A FRAMEWORK TO IMPLEMENT THE GENEVA CONSENSUS - [RTRS]
• Bloomberg - "The World Bank cut its global-growth forecast for this year to 2.3% from 2.7% previously, in what would mark the weakest pace in 17 years outside of the 2009 and 2020 recessions. It also warned that economic expansion in the first seven years of this decade is on track to be the slowest for any period since the 1960s."
• Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at -19bps.
• The bills strip has bear-steepened, with pricing -2 to -4.
• RBA-dated OIS pricing is firmer across meetings today. A 25bp rate cut in July is given a 79% probability, with a cumulative 73bps of easing priced by year-end.
• Today, the local calendar will be empty.  
• The AOFM plans to sell A$1000mn of the 1.75% 21 November 2032 bond today.

In local morning trade, NZGBs have bull-flattened, with benchmark yields flat to 2bps lower, after US tsys finished Tuesday’s NY session slightly mixed. 

• Ranges were narrow for US tsys ahead of today’s key CPI data. Analyst unrounded estimates see core CPI inflation accelerating mildly to 0.27% M/M (median, 0.28% average) in May after 0.24% M/M in April. We’ve seen an unrounded range of 0.23-0.34% M/M, with some sizeable discrepancies in used cars, lodging away from home, and CPI-specific airfares. The broad assumption is that May could have started seeing a greater tariff impact than April, but firmer increases are more likely to show in summer months. (See link)
• No new developments from California as US Marines deployed to quell any deportation unrest.
• Net migration estimates fell to +1,810 in April from a revised +1,950 in March.
• Swap rates are flat to 2bps lower.
• RBNZ dated OIS pricing is little changed across meetings. 4bps of easing is priced for July, with a cumulative 29bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$200mn of the 4.25% May-36 bond.