Cash Bonds Little Changed

In Tokyo morning trade, JGB futures have slightly weakened from overnight closing levels, -6 compared to settlement levels.

• Offshore investors were strong buyers of local bonds for the second straight week, with just over ¥1500bn in net inflows into the space. This was the best two weeks of inflows since mid-March of this year.
• In terms of Japan's domestic outflows, we also saw local investors snapping up offshore bonds. We have seen local investors net purchase just over ¥4trln in offshore bonds in the past 3 weeks. Broader trends around the Fed easing cycle likely commencing in September could be playing a role in such flows.
• The preliminary Japan PMIs for August improved, per the Jibun Bank survey measures. Manufacturing rose to 49.5, from 49.1 in July. We are still below recent highs, with the index unable to sustain +50 readings in recent years. The services PMI rose to 54.0 from 53.7 prior. This is close to 2024 highs (although in 2023 the index peaked near 56.0). The composite index is back to 53.0, a fresh high since the first half of 2023.
• Cash US tsys are flat to 1bp cheaper across benchmarks in today’s Asia-Pac session.
• Cash JGBs are little changed across benchmarks. The benchmark 10-year yield is 0.3bp lower at 0.877% versus the cycle high of 1