[MARKET ANALYSIS] JBGs outperform; USTs quiet ahead of PCE data

The report indicates a cautious market atmosphere as UST futures are slightly down, reflecting positioning ahead of the important PCE data release, which is crucial for assessing inflation and potential Fed policy moves.

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  • UST Futures fall slightly from best levels seen in Wednesday’s session but hover around the U/C mark ahead of weekly claims data and Core PCE index, the Fed’s preferred gauge for inflation.
  • Bund Futures trade muted amid a lack of catalysts for European markets. German paper fell in Wednesday’s session, diverging from USTs, as the ‘buy America’ trade re-emerges following de-escalating EU-US trade tensions.
  • JGB Futures continue to rebound from the selloff at the start of the week and currently outperform their EU and US counterparts. This comes ahead of the BoJ rate decision on Friday, in which markets anticipate a hold by the Bank.
Context

In contrast, JGBs show strength, likely benefiting from expectations that the BoJ will maintain its current stance in tomorrow's decision, diverging from the quieter Bunds amid a resurgence of interest in U.S. assets. Overall, the market seems to be positioning for upcoming economic indicators that could significantly influence different central bank policies across the regions.

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