Focus on yields, ESP JP, on otherwise rare quiet day, bond vol today

Asia Market Update: Focus on yields, esp JP, on otherwise rare quiet day; Bond vol today, provides potential entry for corporate issuance in JP.

General Trend

- Japan’s National April CPI figures confirmed the earlier Tokyo CPI with >3% for all of Headline, Core and Core-Core readings. Core reading was highest in more than 2 years. Came as Nikkei reported that Japan corporate earnings face first decline in 6 years.

- Prior to that, overnight JP yields kept rising – counter to other developed nations, with JP 10-yrs +3bps to 1.568%, while today JP 30-yrs +2.5bps after having hit record highs earlier this week.

- Total bids of ¥314B for the longer duration 10-25 yr JGBs in today’s BOJ outright bond auction - only about half that of the shorter durations' total bids. The 10-25-years also saw a much larger tail than the shorter durations.

- Korean Finance Ministry took the unusual step of saying it will closely monitor US and Japan Treasury bond markets.

- Korea comments came as Philippines Central Bank Chief: 'May cut' US Treasury holdings, although likely to remain 'important' part of reserves.

- Further signs of economic recovery in New Zealand with hotter than expected Retail Sales in the first quarter, following on at a similar pace to the prior quarter (both approaching 1%). NZ yields extend post budget drop; NZ 10 year yields, -4.5bps.

- Relatively quiet on the trade front as ECB Chief Lagarde complained that "international trade will never be the same" amid reports the US ‘unhappy’ with the progress of the EU trade talks; Japan’s trade rep Akazawa said to revisit the US for trade talks again next week; Meanwhile Japan PM Ishiba said he had a phone call at Pres Trump’s request, but did not talk specifically about tariffs, but the two did say they would meet at the G7 in Canada in mid-June.

- Korea’s Jun 3rd Presidential race said to have tightened sharply following TV debate.

- Significant amount of Japan corporate issuance today, possibly due to bond volatility providing a window?

- Asian stocks all green amid fall back in US Treasuries yields, including 10-year yields falling back into 4.50% handle after reaching 4.60% handle yesterday. (Follows passage of Trump’s ‘One big, beautiful bill” by the US House overnight). Hang Seng outperformed Asia again today, looking to close out its 6th straight winning week.

- WTI Crude oil continued to give up gains following another potential production increase out of OPEC+, heading back down towards $60bbl following the spike to $64 bbl a couple of days ago on reports that Israel was preparing to bomb Iranian nuclear facilities.

- Just before the Asian open, US Pres Trump said to sign a nuclear order later on Friday to invoke the Defense Production Act (DPA) - a wartime-era law - that allows the govt to direct industrial production for national security purposes, with the aim of reducing US uranium dependence.

- US equity FUTs flat to slightly down during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- N/A.

Holidays in Asia this week

- No holidays in Asia this week.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,343.

- RBA's Hauser: China is seemingly strong position on trade talks and has scope for more economic stimulus [overnight update].

- Australia sells A$800M vs. A$800M indicated in 2.75% Nov 2028 bonds; Avg Yield: 3.4859% v 3.2952% prior; bid-to-cover: 4.99x v 4.55x prior.

- New Zealand Q1 Retail Sales (Ex Inflation) Q/Q: 0.8% v 0.0%e.

- RBNZ: The mean household expectation for one-year-ahead annual inflation increased from 4.9% to 5.6% this quarter.

- New Zealand sells total NZ$450M vs. NZ$450M indicated in 2029, 2033 and 2041 bonds.

China/Hong Kong

- Hang Seng opens flat at 23,557; Shanghai Composite opens -0.1% at 3,376.

- China brokerages said to have cut rates on client margin deposits - China Securities Times.

- China Nonferrous Metals Industry Association (CNIA) said the country’s gallium and germanium recovery rates ‘rose’ – US financial press.

- Reportedly China's Xi and Pres Trump have not spoken since the Geneva tariff reduction agreement – CNN [overnight update].

- JPM CEO Dimon in meeting with China Vice Premier He Lifeng: Will continue to cultivate Chinese capital market - Chinese state press [overnight update].

- (UK) PM Starmer: Signed Chagos Islands agreement to return islands to Mauritius; Base is critical to keeping Britain safe; Without this deal, China could establish a base near Chagos [overnight update].

- (FR) France Pres Macron: Discussed trade relations with China Pres Xi and agreed to advance as quickly as possible on Cognac issue [overnight update].

- Hong Kong Apr CPI Composite Y/Y: 2.0% v 1.6%e [overnight update].

- China PBOC sets Yuan reference rate: 7.1919 v 7.1903 prior.

- China PBOC Open Market Operation (OMO): Injects CNY143B in 7-day reverse repos; Net injects CNY36B v injects CNY90B prior.

- China sells 3-year, 10-year and 50-year Sovereign bonds - traders.

Japan

- Nikkei 225 opens +0.4% at 37,147.

- JAPAN APR NATIONAL CPI Y/Y: 3.6% V 3.5%E; CPI (EX-FRESH FOOD) Y/Y: 3.5% V 3.4%E.

- Japan PM Ishiba: Confirms to have held phone call with US Pres Trump for about 45 min; Looking forward to seeing Trump in person in Canada.

- Follow up: Japan corporate earnings face first decline in 6 years - Nikkei [update].

- Follow up: Japan Economic Revitalization Min and Top Trade Negotiator Akazawa said to revisit US for trade talks from May 30th; “Japan has its own interests to protect”.

- BOJ Gov Ueda: Declined to comment on short-term moves in market; Big uncertainties remain over tariff impact.

- Japan Economic Revitalization Min and Top Trade Negotiator Akazawa: No change to Japan's stance of demanding an elimination of US tariffs [overnight update];

- Japan reportedly reconsidering Duty-Free shopping rules for foreign tourists - local press.

- BOJ Outright Bond Purchase Operation for 1~3 Years; 3~5 Years; 5~10 Years and 10-25 Years maturities; Leaves purchase amounts unchanged.

Korea

- Kospi opens +0.4% at 2,603.

- South Korea Apr PPI Y/Y: 0.9% v 1.3% prior.

- South Korea Fin Ministry: To closely monitor US and Japan Treasury bond markets - statement from F4 meeting from Acting Fin Min Kim.

- South Korea main opposition party (Democratic Party) DP's Lee support falls to 45% ahead of Jun 3rd election (v 51% prior); PPP's Kim at 26% - Gallup poll.

- South Korea might hold the 3rd round of 'working-level' US trade talks following the Jun 3rd elections in South Korea - Yonhap.

- Follow up: South Korea Defense Ministry: No discussion with US on reported troops withdrawal.

- Reportedly US considers withdrawing ~4.5K troops from South Korea - press [overnight update].

Other Asia

- Singapore Apr CPI M/M: -0.3% v -0.4%e; Y/Y: 0.9% v 0.8%e.

- Philippines Central Bank Chief: 'May cut' US Treasury holdings, USTs likely to remain 'important' part of reserves.

- Philippines Central Bank (BSP) Gov Remolona: Expects resignation of economic team will Not be accepted (Reminder earlier Philippines President Marcos: Orders all cabinet secretaries to resign after (disappointing) mid-term elections – press).

- Taiwan to place 30% cap on the single ETF investments of insurers [inline] – Local media.

North America

- (US) Large US banks said to be 'exploring' a Stablecoin consortium - WSJ.

- US Dept of Energy said to have designated Coal for steelmaking as a 'critical mineral' - financial press.

- (US) Reportedly US Pres Trump to sign nuclear related order Friday; Will invoke wartime act over US uranium dependence - press.

- (US) HOUSE OF REPRESENTATIVES PASSES TRUMP'S TAX AND SPENDING BILL: VOTE WAS 215-214-1. WARREN DAVIDSON and THOMAS MASSIE voted NO, along with every Democrat. HFC CHAIR ANDY HARRIS VOTED PRESENT.

- (CA) Canada May CFIB Business Barometer: 40.0 v 34.7 prior.

- (US) House Speaker Johnson: Reiterates the bill will be done by July 4th.

- (US) Fed's Waller (voter): Reiterates if tariffs are closer to 10% then economy would be in good shape for H2 and Fed could be in position to cut; Fed will not buy bonds in primary auctions - Fox News interview.

- (MX) Mexico IGAE Economic Activity Index (Monthly GDP) M/M: -0.4% v -0.1%e; Y/Y: 2.5% v 2.9%e.

- (US) Apr Chicago Fed National Activity Index: -0.25 v -0.25e.

- (US) INITIAL JOBLESS CLAIMS: 227K V 230KE; CONTINUING CLAIMS: 1.903M V 1.882ME.

- (US) MAY PRELIMINARY S&P MANUFACTURING PMI: 52.3 V 49.9E (5th month of expansion): Average prices charged for goods and services jumped at a rate not witnessed since August 2022.

- (US) APR EXISTING HOME SALES: 4.00M V 4.10ME (slowest pace since 2009).

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: BCF +120 VS. +106 BCF TO +129 BCF INDICATED RANGE.

- (US) White House Council of Economic Advisers Chair Miran: US continues to have strong Dollar policy; There's no secret work under way on currency talks.

Europe

- (EU) US said to be ‘unhappy’ with the progress of the EU trade talks - FT.

- (DE) German Chancellor Merz said to back Nordstream ban - FT.

- EU to postpone carbon fiber restrictions for autos - Japanese press.

- (IE) Ireland May Consumer Confidence Index: 60.8 v 58.7 prior.

- (UK) May GfK Consumer Confidence: -20 v -22e.

- ECB Chief Lagarde: International trade will never be the same again - TV interview.

- (UK) MAY CBI INDUSTRIAL TRENDS TOTAL ORDERS: -30 V -24E.

- (IE) Ireland Apr PPI M/M: -1.4% v -2.4% prior; Y/Y: -3.6% v -1.9% prior.

- (IR) Iran Foreign Min Araghchi: Not expecting a nuclear deal until the enrichment issue is resolved.

- (SE) Sweden Central Bank (Riksbank) Gov Thedeen: Inflation remains somewhat elevated but expected to come down during the year.

- (EU) ECB ACCOUNT OF APRIL 16-17 POLICY MEETING (AKA MINUTES): Few members noted that they could have felt comfortable with a 50 basis point rate cut..

- (UK) BOE’s Pill (chief economist, hawkish dissenter): There's a case for CPI forecasts less prominent - speech text.

- (EU) ECB’s Nagel (Germany): Still on course to meet 2% inflation goal in 2025; Current rate level isn't restrictive.

- (IT) Italy Econ Min Giorgetti: EU will find a reasonable solution on tariffs.

- (EU) EU Economy Commissioner Dombrovskis: G7 finance leaders have had positive and successful meeting; Ministers have put forth proposals for the next package of EU sanctions on Russia oil price cap adjustments: $50bbl was suggested; Trade discussions were 'A difficult subject'.

- (EU) ECB de Guindos (Spain): 2% price target to be 'relatively quickly;' Converging to target in a 'stable way'.

- G7 Fin Min Communique: Underscore need to address excessive imbalances and strengthen fundamentals; Central banks remain committed to maintaining CPI.

Levels as of 01:20 ET

- Nikkei 225 +0.5%, ASX 200 +0.2%, Hang Seng +0.8%; Shanghai Composite flat; Kospi +0.1%.

- Equity S&P500 Futures flat; Nasdaq100 -0.1%; DAX +0.1%; FTSE100 flat.

- EUR 1.1279-113.21; JPY 143.36-144.18; AUD 0.6408-0.6439; NZD 0.5896-0.5922.

- Gold +0.7% at $3,317/oz; Crude Oil -0.6% $60.85/bbl; Copper +0.5% at $4.7015/lb.