Global Macro Commentary: May 28: Truce Hopes Lift Bonds

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Global Macro Commentary: May 28: Truce Hopes Lift Bonds

UpdateMbroader risk appetite improved. EUR/USD rose 0.2% to 1.17 and GBP/USD

gained 0.1% to 1.34, though both pairs remained capped by still-hawkish ECB

and BoE repricing. USD/JPY declined 0.2% to 159.24 as lower US yields

supported JPY, though traders continued to focus on intervention risks

around the 160 level and the prospect of further BoJ normalization. CHF

strengthened 0.4% versus USD alongside the rally in duration, reflecting

continued demand for low-volatility defensive currencies even as broader

market sentiment improved.

• JGB opened cheaper in the Tokyo morning session, but the selling

momentum quickly moderated heading into morning session close ahead

of BoJ JGB purchase operation. The 3–5y BoJ operation was a large tail

(average: -2.4bp vs. cut-off: -4.0bp), highlighting strong underlying demand

and supporting the rally in the sector. Market expectation for BoJ rate hike

somewhat cools down after Thursday’s BoJ Governor speech without no hint

at near-term rate hike. In contrast, the super-long sector came under

pressure, particularly in the 20y–30y sector in the Tokyo afternoon session.

Uncertainty for JGB issuances in the upcoming supplementary budget

weighed on the sector. Ultimately, JGB curve twist steepened; 2y JGB rallied

by 3.0bp to 1.35%, 10y JGB sold off by 0.5bp to 2.695%, 30y JGB sold off by

5.0bp to 3.965% on a simple yield basis.

• Euro-area and UK rates rallied alongside Treasuries, though domestic

central-bank dynamics continued to keep front-end easing expectations

restrained. German yields fell across the curve (2y: -2.6bp; 10y: -2.5bp; 30y: -

2.1bp), with bunds initially pressured overnight by higher oil and ECB

hawkishness before reversing after the US-Iran headlines. ECB minutes