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10-Year JGB Yield Wary Of Testing 0.25% Ceiling, Tsys & ACGBs Slip

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Benchmark JGB futures crept higher as T-Notes and Aussie bond futures struggled for momentum. Regional headline flow was fairly light and centred around Chinese inflation figures, as the perceived moderation in price pressures sparked speculation re: PBOC easing prospects.

  • T-Notes found support at 117-25+ after its initial downtick and stabilised within a narrow range thereafter. They last trade -0-02 at 117-27+, close to the mid-point of that range. Eurodollar futures run 0.25-1.0 tick lower through the reds. Cash Tsys slipped across the curve, with yields last seen 0.8-2.4bp higher. All eyes will be on U.S. CPI data, with headline inflation expected to have topped 8% in May. Also coming up is the flash reading of June Uni. of Mich. Sentiment, but inflation data will obviously take precedence.
  • JGB futures ground higher but buying pressure lacked conviction. They last change hands at 149.58, 7 ticks shy of yesterday's settlement/session high. Cash JGB yields are barely changed across the curve, with 10-year yield operating within touching distance from the 0.25% cap of its permitted trading band. That said, it refrained from testing that level, as participants seem confident about the BoJ determination to enforce its interest-rate peg.
  • Cash ACGBs weakened from the off as spillover from the NY session weighed. The curve runs steeper at typing, with yields last seen 2.2-5.0bp higher as 10s underperform. Light steepening impetus materialised in futures space as well, YM now trades -2.6 & XM -5.2. Bills last 2-5 ticks through the reds. The AOFM's issuance slate for next week provided nothing to rock the boat, with local financial markets due to be shut on Monday.

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