JGBS: Solid Rally For Futures Overnight, HH Spend Data Due

In post-Tokyo trade, JGB futures closed stronger, +20 compared to settlement levels, after US tsys finished 5-6bps richer on Tuesday on US/Iran deal optimism that permeated the session with brief pullbacks on reality checks and policy.

• US tsys rallied after Bloomberg reported earlier that Qatar says language has been drafted on a possible US-Iran deal, while weaker crude prices provided ongoing support for US tsys throughout the session. Brief pause after Qatar admitted nothing was in the books when it comes to US-Iran direct talks.
• "U.S. Treasury Secretary Scott Bessent said he was sure Bank of Japan Governor Kazuo Ueda will "do what is best" for the country's economy, public broadcaster NHK reported on Wednesday. "I do believe that part of the inflation uptick in Japan was a result of the weak yen and also the energy prices," Bessent told NHK in an interview.” - RTRS
• "Bessent had said he would meet Ueda at a U.S.-hosted G20 finance leaders' meeting at the end of August, which would precede the BOJ's September policy meeting."
• Today, the local calendar will see Labor Cash Earnings and S&P Global PMI Composite & Services (F), alongside BOJ Minutes of June Meeting.

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ACGBs (YM +5.0 & XM +5.0) are stronger after cash US tsys finished 5-6bps richer on Tuesday on US/Iran deal optimism that permeated the session with brief pullbacks on reality checks and policy.

• Waves of support followed after Tsy Sec Bessent commented on purported US/Iran talks, says may have deal today, followed by Sec of State Rubio commenting there's been progress made in those talks, but not finality yet. We're hoping that will happen very shortly."
• Market sentiment looked past Philly Fed Paulson hawkish comment on potential tightening if inflation persists that policy is not sufficiently restrictive to get inflation down to the 2% target and that "more restrictive policy may be needed".
• S&P Global PMI(F) printed: Services index rises to 53.6 from 50.5 in June; and Composite index rises to 53.2 from 50.4 in June.
• Cash ACGBs are 5bps richer with the AU-US 10-year yield differential at +31bps.
• The bills strip has bull-flattened, with pricing flat to +4 across contracts.
• RBA-dated OIS pricing shows modest tightening across all meetings, with the probability of a 25bp hike rising from 6% for August to 59% by December 2026.  
• This week, the AOFM plans to sell A$1000mn of the 3.75% 21 April 2037 bond today and A$1000mn of the 1.50% 21 June 2031 bond on Friday.

TYU6 is dealing at 108-28, +0-01 from closing levels in today’s Asia-Pac session.

• Cash bonds finished 5-6bps richer on Tuesday on US/Iran deal optimism that   permeated the session with brief pullbacks on reality checks and policy.
• US tsys rallied after Bloomberg reported earlier that Qatar says language has been drafted on a possible US-Iran deal, while weaker crude prices provided ongoing support for US tsys throughout the session. Brief pause after Qatar admitted nothing was in the books when it comes to US-Iran direct talks.
• Waves of support followed after Tsy Sec Bessent commented on purported US/Iran talks, says may have deal tomorrow, followed by Sec of State Rubio commenting there's been progress made in those talks, but not finality yet.  We're hoping that will happen very shortly."
• Market sentiment looked past Philly Fed Paulson hawkish comment on potential tightening if inflation persists that policy is not sufficiently restrictive to get inflation down to the 2% target and that "more restrictive policy may be needed".
• US tsys draw some sell interest while futures drift near recent highs after JOLTS job openings comes out lower than expected Quits & Layoffs levels much higher than exp & priors up revised. Factory Orders better than last month but lower than estimated, Factory Durables & Cap Goods better than expected.

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