Cash Bonds Cheaper As The Market Awaits US Payrolls

In Tokyo morning trade, JGB futures are cheaper, -13 compared to settlement levels, but have slightly pared overnight losses.

• JGB futures have traded higher last week but have faded since. The recent rally, however, topped initial resistance at 146.52, the Dec 7 high, and marks a bullish development, according to MNI’s technicals team. This opens resistance at 147.27 further out, the Dec 06 high and 148.74, the Jul 24 high. 143.44, the Oct 31 low, marks key support and a medium-term bear trigger. Initial support to watch is at 144.60, the Dec 11 / 8 low.
• On the data front, Japan’s monetary base rose 7.8% in December from a year ago, while Jibun Bank Services & Composite PMIs printed respectively 51.5 vs. 52.0 (flash) and 50.0 vs. 50.4 (flash). Consumer confidence is due later.
• Cash JGBs are cheaper across the curve, with yields flat (2-year) to 1.5bps higher (5-year). The benchmark 10-year yield is 1.1bps higher at 0.626% versus the Nov-Dec rally low of 0.555%.
• Swaps are slightly cheaper out to the 30-year and 1.8bps cheaper beyond. Swap spreads are tighter out to the 30-year and wider beyond.