Cheaper, Tokyo CPI Has Limited Impact, 10Y Supply Due

In Tokyo morning trade, JGB futures are holding cheaper, -14 compared to settlement levels, after Tokyo CPI printed broadly in line with expectations.

• Feb Tokyo CPI was close to expectations in y/y terms. The headline was +2.6% y/y, versus 2.5% forecast and the 1.8% prior outcome. The ex-fresh food measure rose 2.5%, in line with expectations (1.8% prior). The ex-fresh food, energy metric was 3.1% y/y, also in line with forecasts and compared with 3.3% prior (revised from the originally reported 3.1%).
• In m/m terms, headline inflation rose 0.3% (seasonally adjusted) the firmest pace since Oct last year. The core measures were up 0.1% m/m, while good prices rose 0.3% and services gained 0.2% (same as last month).
• The ex-all food and energy index rose 0.3% m/m (not seasonally adjusted), the firmest pace since Oct last year.
• The cash JGB curve has bear-steepened, with yields flat to 2bps higher. The benchmark 10-year yield is 0.7bp higher at 0.726% ahead of today’s supply. The current 10-year auction is taking place with an outright yield approximately the same as the early February offering. Nevertheless, the current yield is still more than 20bps below the cycle peak set in early November.
• The swaps curve has also slightly bear-steepened, with rates flat to 1bp higher. Swap spreads are mixed.