Cash Bonds Little Changed Ahead Of 2Y Supply

In Tokyo morning trade, JGB futures are weaker and at session lows, -8 compared to settlement levels.

• Offshore purchases of local bonds continued, albeit down from the prior week's pace. This marked the third straight week of inflows into this space. In terms of Japan investor outflows, we saw continued solid momentum into offshore bonds, the fourth straight week of local purchases. Such flows may be picking up amid more signs of a turn in the global monetary policy cycle. JPY hedging costs have come down sharply recently but are still elevated by historical standards.
• Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest twist-steepening. Nvidia’s results and Fed Bostick’s remarks aftermarket have had little impact.
• Cash JGBs are little changed across benchmarks. The benchmark 2-year yield is 0.5bp higher at 0.387% ahead of today’s supply. Today's auction is set against a backdrop of an outright yield that is slightly below July's level and 10bps lower than the cyclical peak reached earlier this month, which was the highest since 2009.
• Swap rates are little changed out to the 10-year and 4bps higher beyond. Swap spreads are wider beyond the 10-year.