Cheaper After Higher Than Expected PPI, Cash US Tsys Open Weaker

In Tokyo morning trade, JGB futures are cheaper, -23 compared to settlement levels, after closing the overnight session with a downtick.

• December’s PPI printed higher than expected at +0.3% m/m and flat y/y versus expectations of 0% and -0.3% respectively, and +0.2% and +0.3% prior. Bloomberg reported that the figure was in line with the BoJ’s view that inflationary pressure will ease for some time before picking up again. Data Friday are expected to show that growth in consumer prices excluding fresh food, the core gauge, slowed to 2.3% in December. Tokyo inflation, a leading indicator for the national trend, weakened last month to the slowest pace in over a year. (See link)
• Cash tsys are dealing 5-6bps cheaper across benchmarks in today’s Asia-Pac session after the observance of the Martin Luther King public holiday yesterday.
• Cash JGBs are cheaper across the curve, with the 20-year underperforming (+2.1bps). The benchmark 10-year yield is 1bp higher at 0.581% versus yesterday’s low of 0.556%.
• The 5-year yield is 0.4bp higher at 0.173%, outperforming on the curve, ahead of today’s supply.
• Swaps curve has bear-steepened, with rates 1-3bps higher. Swap spreads are wider.