JGBS: Cash Bonds Cheaper But Strong 5Y Auction Assists Market

JGB futures are weaker but in the middle of today’s range, -21 compared to settlement levels.

• Outside of the previously outlined M2 & M3 Money Stock, there hasn't been much by way of domestic drivers to flag. Machine Tool Orders data is due soon.
• Cash bonds are ~1bp richer in today’s Asia-Pac session after Monday’s bear-steepener. The focus remains on this week's CPI and PPI inflation data on Wednesday and Thursday respectively.
• Analysts’ forecasts for November US CPI imply remarkably steady sequential inflation versus October, with the MNI median and average for core expected to show an unchanged 0.28% M/M. Combined with Thursday’s estimates for PPI inputs, core PCE is in turn seen moderating to between 0.18-0.25% M/M in November, vs 0.27% in October. (See MNI CPI Previewhere)
• Cash JGBs are flat to 2bps cheaper across benchmarks beyond the 1-year. The benchmark 5-year yield is 0.6bps higher at 0.728% after today’s supply.
• Today’s 5-year bond auction demonstrated robust demand, with the auction price surpassing dealer expectations, the cover ratio rising significantly and the auction tail narrowing slightly.
• Swap rates are little changed out to the 10-year and 3bps higher beyond. Swap spreads are tighter out to the 10-year and wider beyond.
• Tomorrow, the local calendar will see PPI data and BSI Large All Industry Survey results.