Market Commentary: Thursday 5th June

President Trump said his call with Russian President Putin was “a good conversation, but not a conversation that will lead to immediate peace,” following the Ukraine drone attack over the weekend—the most significant blow of the war to date against Moscow’s long-range bomber fleet. A direct meeting between Putin and Zelensky, proposed by Kyiv, has not been considered in practical terms, according to a close Putin adviser.

The prevailing theme across Japan, Europe, and the US is a general lack of appetite for longer-maturity debt. The 30-year JGB auction saw its weakest demand since 2023, ramping up pressure on the Japanese government to adjust issuance. However, given the strong caution among investors going into the auction, the result was not as bad as many had feared, providing some immediate relief. Traders are now looking ahead to the BoJ’s next meeting on June 16–17, where it will review its bond-buying plans.

Macro-wise, the key event today is the ECB rate decision at 1:15 p.m., where markets are pricing in a 99.4% chance of a 25-bps cut, with the baseline scenario pointing to another 25-bps reduction in September. EUR/USD has remained rangebound ahead of the decision and is currently trading at 1.1413.

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