A Touch Firmer To Start

Monday’s bid in the belly to intermediate zone of the cash JGB curve rolls into Tuesday, despite the cheapening witnessed in core global FI markets since, with the major benchmarks running 0.5-1.5bp richer, with the 5- to 7-Year zone leading. Futures have firmed a little from late overnight session levels as a result, but the move remains modest, leaving the contract -17.

• Swap rates are mixed on the day, dealing either side of, but close to, flat.
• Local data has seen a steady rate of contraction in the flash m’fing PMI survey, while the rate of expansion observed in the services release accelerated, leaving the composite reading in expansionary territory for the first time since October (assuming the general direction of travel is maintained in the final releases). S&P Global noted that “Japan’s private sector kicked off 2023 on a more positive note, as signalled by activity returning to growth territory in January. However, similar to trends recorded over much of the past six months, a divergence between the manufacturing and services sectors has remained. While manufacturing firms continued to face muted customer demand, service providers made sustained gains from the travel subsidy programme and recent relaxation of COVID measures.”
• Looking ahead, continued post-BoJ reshuffles will likely provide the focal point of Tuesday’s price action.