Better Bid, Despite Tepid Demand At Auction

JGB futures were better bid, sitting 12 ticks better off vs. settlement ahead of the close, with the long end of the cash curve outperforming, as yields ticked lower across the curve, while swaps lagged in the main. There was little to highlight in terms of a driving force behind the bid, although Japanese household spending missed expectations and U.S. Tsy yields were slightly richer across the curve, with Brexit risk and Sino-U.S. headlines front and centre.

• The latest round of 5-Year supply wasn't the firmest, with the average price matching broader dealer expectations for the low price (as per the BBG dealer poll), tail widening at the margin and cover ratio holding steady.
• Elsewhere, Suga pointed to his status as a continuation candidate, reaffirming his support for outgoing PM Abe's policies, while he also alluded to the possibility of a swift snap election if he secures leadership of the ruling LDP Party, per local press reports. We had heard suggestions of such a move from senior party officials over the weekend, and it would make sense, as Suga would surely look to capitalise on the bounce in cabinet approval ratings since he has become the frontrunner to succeed Abe.
• Preliminary machine tool orders headlines tomorrow's local docket, with 6-month Bill supply also due.