JGBS: Modestly Richer Ahead Of Tomorrow's PPI Data & 30Y Supply

JGB futures are stronger and at session bests, +9 compared to settlement levels.

• Robin Brooks on X: "Japan is running out of fiscal space. It's tried everything from financial repression to using its central bank to cap yields. Both of these keep yields artificially low, which just leads to currency debasement. That's the story of the Yen in recent years."
• Cash US tsys are ~1bp richer in today's Asia-Pac session. Traders have resumed pricing in a quarter-point Fed hike by year-end due to a stronger-than-expected labour market and higher inflation. The focus is on May CPI data on Wednesday.
• Hidden PDF: Monthly Moderation But Still Too High. Monthly inflation is expected to moderate to a still elevated pace in May, with MNI unrounded consensus pointing to 0.51% M/M for headline CPI and 0.23% M/M for core CPI. It should see headline CPI jump further to 4.2% Y/Y with a risk of 4.3% (either strongest since Apr 2023) whilst core CPI would see a more modest acceleration to 2.8-2.9% Y/Y (strongest since Sep 2025).
• Cash JGBs are flat to 2bps richer, with the futures linked 7-year leading.
• The benchmark 30-year yield is 1.3bps lower at 3.942% versus the cycle high of 4.214%.
• Tomorrow, the local calendar will see PPI data alongside 30-year supply.

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