JAPAN DATA: Offshore Flows Muted last Week As Mth/Qtr End Impacted

There was a strong rise in Q1 manufacturing volumes, which with a solid rise in real retail sales and export volumes in the quarter should support GDP growth which is released 18 June. The RBNZ has a 1% q/q Q1 increase in its May forecasts as most of the quarter occurred before the onset of the Iran War. It is likely to be felt in Q2 though with the RBNZ expecting growth to be flat on the quarter.

• Manufacturing volumes rose 3.6% q/q after falling 0.4% q/q in Q4. The volume of inventories in the sector increased 3.0% q/q.
• Total business sales values rose 5.3% y/y in Q1 with 11 of the 14 sectors posting rises but manufacturing (+2.8% q/q & 3.9% y/y), retail & accommodation (+2.2% & 5.9%) and wholesale trade (+3.8% & 8.8%) drove the improvement. Profits were up 11% y/y while salaries and wages increased 2.9% y/y. 

TYU6 is dealing at 108-31+, -0-01+ from closing levels in today’s Asia-Pac session.

• Cash bonds finished Monday’s session showing a modest bear-steepener, with benchmark yields 1-4bps higher.
• While oil prices rallied in the lead-up to the NY session, it then fell to only around a percent on the day as Iran and Israel agreed to halt hostilities, but the ceasefire is fragile. President Trump also said that US-Iran negotiations continued despite the resumption of the conflict. This returned some optimism back into oil markets that the Strait of Hormuz would reopen
• MNI US CPI Preview: 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).
• MNI Techs: Treasuries reverse course to largely weaker again, low end of session range:   TYU6 trades -2 at 109-00.5 vs. 108-25 overnight low - initial technical support. The bear trigger lies at 108-08+, the May 19 low. Clearance of this level would confirm a assumption of the downtrend.

In post-Tokyo trade, JGB futures closed weaker, -10 compared to settlement levels, after US tsys finished showing a modest bear-steepener on Monday, with benchmark yields 1-4bps higher.

• While oil prices rallied through the APAC session and into early European trading, it then fell to be up only around a percent on the day as Iran and Israel agreed to halt hostilities, but the ceasefire is fragile. President Trump also said that US-Iran negotiations continued despite the resumption of the conflict. This returned some optimism back into oil markets that the Strait of Hormuz would reopen.
• Brent reached a high of $98.08/bbl and then fell to a low of $93.64. It rose 1.1% to $94.11. Despite Monday's large moves, the benchmark held between initial resistance at $102.77 and support at $89.93.
• MNI US CPI Preview: 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% (strongest since Apr 2023) whilst core CPI would see a more modest acceleration to 2.8-2.9% Y/Y (strongest since Sep 2025).
• Today, the local calendar will see: Money Stock M2/M3, Machine Tool Orders YoY