Belly Of Cash Curve Underperforms, Carry Trade Is Back

JGB futures are weaker, -40 compared to the settlement levels.

• Outside of the previously outlined international investment flow data, there hasn't been much in the way of domestic drivers to flag. The Tertiary Industry Index fell 1.3% m/m in June versus +0.3% estimate.
• (Bloomberg) "Nomura Holdings Inc., Japan’s biggest brokerage, has seen a variety of investors start borrowing the yen again to invest the proceeds elsewhere in higher-yielding assets. It suggests corporate clients and hedge funds, who have been enthusiastic carry traders, are getting back into those deals." (See link)
• Cash US tsys are 1-3bps richer, with a steepening bias, in today’s Asia-Pac session after yesterday’s sharp sell-off following stronger-than-expected data.
• Cash JGBs are 2-5bps cheaper, with the belly of the curve underperforming. The benchmark 10-year yield is 4.1bps at 0.880% versus the cycle high of 1.108%.
• Swaps are mixed, with rates 2bps lower (7-year) to 3bps higher (40-year).
• On Monday, the local calendar will see Core Machine Orders data alongside 1-year supply. 20-year supply is due on Tuesday.