Cash Bonds Little Changed, 5-year Climate Transition Supply Tomorrow

JGB futures are weaker and at session cheaps, -7 compared to settlement levels.

• With the domestic calendar light today, the futures move away from session bests was assisted by a 1-2bps cheapening in cash US tsys in today’s Asia-Pac session.
• (MNI) Heightened uncertainty over the U.S. economy will make a Bank of Japan rate hike less likely and fuel Governor Kazuo Ueda’s cautious approach to monetary policy when the board meets July 30-31, MNI understands. (See link)
• Ueda will prefer to hold the policy interest rate until he receives evidence the U.S. economy will not deteriorate sharply. While the BoJ has not revealed whether Ueda will attend next month’s Jackson Hole economic meeting, the governor joined last year’s session and will likely make an appearance this year to gather insight into the U.S. economy.
• A former BoJ economist last week gave a roughly 40% chance of a July rate hike due to favourable trends in the Tankan survey, wages and services prices.
• Cash JGBs are slightly mixed across benchmarks, with yield movements bounded by +/- 1bp. The benchmark 10-year yield is 0.1bp lower at 1.028% versus the cycle high of 1.108%.
• Swap rates are little changed across maturities, with the curve slightly flatter and swap spreads mostly tighter.
• Tomorrow, the local calendar will see Trade Balance data alongside 5-year Climate Transition supply.