US STOCKS: S&P Drifts Lower, Is Dow Transports Telling Us Anything ?

In Tokyo morning trade, JGB futures are weaker, -18 compared to settlement levels.

• (Bloomberg) -- Inflation adjusted Japan existing home sales average price NSA rose 5.5% in March from the same period last year, according to Bloomberg calculations using official data.
• (Bloomberg) -- Japan’s industrial production rose less than expected in May, missing analysts’ estimates as the US tariffs hit the nation’s exports. Factory output increased 0.5% from the previous month, the Industry Ministry reported Monday. Economists had expected a 3.5% gain. Output fell 1.8% from a year earlier, missing expectations of a 1.6% rise.
• Cash US tsys are slightly mixed, with a steepening, in today’s Asia-Pac session after Friday’s modest losses.
• Cash JGBs are ~1bp cheaper across benchmarks. The benchmark 10-year yield is 0.9bp higher at 1.447% versus the cycle high of 1.596%.
• Swap rates are ~1bp higher. 

The CFTC positioning update for the week ending June 24th showed a shift against the USD, particularly in terms of leveraged investors (albeit for the A$). Asset managers were more mixed in terms of the weekly shift.  

• Net selling of the A$, by both leveraged players and asset managers was a standout last week. Both investor bases remain net short the A$. Given generally positive AUD/USD momentum, such flows may be to play for AUD underperformance on key crosses rather than against the USD.
• Leveraged investors added notably to net longs for JPY, EUR and GBP. CAD shorts were also reduced.
• In the asset manager space, aggregate shifts for JPY and EUR weren't large, but net shorts for GBP were added too.
• For NZD, we saw asset managers add longs. At +12k, net longs for this segment is a clear contrast to the still meaningful short asset managers are running with for the AUD. 

Table 1: CFTC FX Positioning By Currency & Investor Type 

Source: Bloomberg Finance L.P./CFTC/MNI 

TYU5 is trading 111-25, down 0-01 from its close. 

• The US 2-year yield opens around 3.742%, down 0.01 from its close.
• The US 10-year yield opens around 4.2825%, up 0.1 from its close.
• MNI FED BRIEF: MN Fed Kashkari Sees Two Rate Cuts This Year. Federal Reserve Bank of Minneapolis President Neel Kashkari said Friday he sees two interest-rate cuts as likely this year, with the first potentially in September, but he maintained that policymakers should remain flexible in case inflation from tariffs take longer to appear. "Since March, we have seen much larger than expected tariffs announced and then modestly pulled back, suggesting that an inflation boost is likely coming. At the same time actual inflation data indicate renewed progress toward our inflation target," he wrote in a blog.
• The 10-year yield has accelerated through its support, this should clear the way for a move lower with the 4.10% area the first target. 10-year yields should now find demand on any bounce back to the 4.35/40% area.
• Data/Events: MNI Chicago PMI, Dallas Fed Man. Activity