Global Macro Commentary | North America: June 16: Ahead of the Fed

Research evidence excerpt

Global Macro Commentary | North America: June 16: Ahead of the Fed

UpdateMreduction in JGB purchases from Apr 2027 was in line with market

expectations. However, the dissenting votes against the rate hike from

dovish board members had not been priced in, together with the revised

wording on the degree of real-rate accommodation, was interpreted as

dovish and heightened concerns that the BoJ’s falling behind the curve. The

July JGB purchase operation schedule made the market more aware of the

risk that supply-demand conditions could loosen further, as the frequency of

purchases was reduced. Selling was concentrated in the 10-20 year sectors in

contrast to Monday’s rally. Ultimately, the JGB curve broadly sold off led by

10-20y sectors; 2y JGB sold off by 1.0bp to 1.405%, 10y JGB sold off by 7.0bp

to 2.645%, and 20y JGB sold off by 7.5bp to 3.535% on a simple yield basis.

TONA-OIS curve also sold off led by 10y sector and outperformed JGBs in

10-20y sectors. In the Tokyo evening session, Deputy Governor Uchida’s

post-meeting press conference tone was largely neutral, offering limited

guidance on the future rate path or terminal rate, leaving the market without

a clear directional signal.

• Euro area rates extended the rally during the London session on further

details around the Iran–US peace deal, albeit at a more moderate pace.

The rally was led by the long-end, with 30y swaps rallying by around 4bp

and curves flattened, with 2s10s in the cash space flattening by almost 2bp.

In EGBs, the move continued to be driven by BTPs, with the 10y BTP/Bund

spread tightening by ~1.6bp. UK gilts also rallied in the long end, while the

front end underperformed after recent BOE-sensitive pricing remained sticky

(2y: +1.0bp; 30y: -3.5bp). Euro-area equities rose, led by France and the