JGBS: Sharp Bull-Flattener After Fin Min Call To Invest Locally
JGB futures are sharply higher, +64 compared to settlement levels, but off session bests.
- Japan's corporate goods prices rose 7.1% in June from a year earlier, the fastest pace since early 2023.
- (Bloomberg) “ Japan's finance minister called for the nation's massive pension funds to increase investments in domestic assets. The remarks led to a jump in the yen and a drop in bond yields, with the yen strengthening and bonds rallying. Any changes to the Government Pension Investment Fund's investment strategy would have to go through an established process and could have broad implications, including a potential boost for the yen and Japanese equities.”
- The prospect that Japan's GPIF could bring funds home to buy JGBs is helping to send yields lower across the curve amid heavy short covering in JGB futures.
- Cash US tsys are also 1-2bps richer in today's Asia-Pac session, extending yesterday's rally amid a tapering of concerns regarding a re-escalation of the US-Iran conflict. There is no scheduled US data on tap today, with the focus on next week's CPI and PPI data on Tuesday/Wednesday, respectively.
- Cash JGBs are flat to 11bps richer, with the long-end leading.
- Swap rates are 1-2bps higher. Longer swap spreads are sharply wider.
- On Monday, the local calendar will be empty.
Bloomberg Finance LP
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS: Cheaper As Oil Rallies On M/E Headlines, Focus Turns To CPI Data
TYU6 is dealing at 109-03, -0-04 from closing levels in today's Asia-Pac session.
- Cash bonds US tsys 2-3bps cheaper in today's Asia-Pac session.
- Oil prices rallied early in APAC trading after news of US attacks on military sites in southern Iran in retaliation for its downing of a US helicopter. They were then supported again by reports of further explosions in southern Iran, which the US confirmed were close to the Strait of Hormuz.
- Also Iran targeted US bases in Kuwait, Jordan and Bahrain and warned countries in the region not to allow the US to use their territory. Once the US said that its action was completed, oil prices eased and are currently slightly higher on the day and above the intraday low.
- The focus now turns to today’s May CPI data. 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).
Bloomberg Finance LP
AUSSIE BONDS: Modestly Richer, US Tsys Cheaper, AU-US10Y Diff At YTD Lows
ACGBs (YM +3.0 & XM +1.5) are modestly richer on a data light session.
- With cash US tsys 2-3bps cheaper in today’s Asia-Pac session, the AU-US 10-year yield differential is 2bps lower at +36bps, the lowest level this year.
- Oil prices rallied early in APAC trading after news of US attacks on military sites in southern Iran in retaliation for its downing of a US helicopter. They were then supported again by reports of further explosions in southern Iran, which the US confirmed were close to the Strait of Hormuz.
- Cash ACGBs are 1-3bps richer with the 3/10 curve steeper.
- The latest ACGB Oct-37 auction saw solid demand, with the weighted average yield coming in 0.59bps through prevailing mid-yields, according to Yieldbroker, continuing the trend of firm pricing at recent ACGB auctions. Moreover, the cover ratio rose to a solid 4.2450x from 3.7389x
- The bills strip pricing is +2 to +5 across contracts.
- RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 6% for June to 52% by September and 80% by December 2026.
- Tomorrow, the local calendar will see Consumer Inflation Expectation data.
Bloomberg Finance LP
ASIA STOCKS: Rising Inflation Risks / Weaker Tech Sees Bourses Lower
After yesterday's bounce major equity bourses in the region were weak again Wednesday as oil headed higher and uncertainty in the US Iran war dampened risk appetite. The NIKKEI is down -1.7% as all major AI Tech names (bar Tokyo Electron) fell today between 3-4%. Domestic economic data added to the market's unease. Japan's PPI jumped by 6.3% YoY in May, vastly outstripping analyst forecasts of 5.6%. The spike was primarily driven by soaring energy costs and the ripple effects of regional conflicts on critical shipping lanes. Investors are becoming increasingly concerned about potential rate hikes both in Japan and the US ahead of Wednesday's May US CPI, with expectations it could rise to +4.2% and bring forward a rate hike in the US.
The KOSPI fell heavily today with SK Hynix and Samsung down over 7%. Given the launch recently of leveraged AI ETFs in Korea, the liklihood going forward for the AI / tech names is higher volatility given the increased leverage.
China stocks fell today as surging domestic wholesale inflation, a broad global retreat from technology sectors, and escalating U.S.-Iran military tensions heavily weighed on investor sentiment. Whilst over the last year the relationship between PPI and CPI has broken down, the fact that the driver of the higher PPI is oil - and oil price rises impact almost everything - could see a reestablishment of the relationship and spell higher CPI in the months to come. Onshore bourses the CSI 300 and Shanghai are both down around -1% whilst Shenzhen is down -2% and Hang Seng -1.1%
