Contained Tokyo Trade, Following Wider Swings In Risk Appetite

JGBs meandered through Tokyo dealing, trading with a low beta to the wider swings in the wider risk backdrop (as is the norm). As a result, JGB futures initially showed lower vs. late overnight session levels, before recovering (see other bullets for more colour on the China-driven nature of broader risk appetite), last dealing +3. Cash JGB trade has been very limited, with the major cash JGB benchmarks running -/+0.5bp vs. Friday’s closing levels.

• There hasn’t been much in the way of notable domestic headline flow to assess since the Tokyo re-open, leaving wider swings in risk appetite in the driving seat.
• Note that the weekend saw Nikkei sources report that the Japanese government will use deficit-financing bonds to cover Y2.7tn of extra spending under a supplementary budget, as it looks to shield consumers and businesses from the well-documented global inflationary pressures. The article suggested that the government plans to formally decide on the spending decision on Monday, with a view to the stimulus being passed in the current parliamentary session.
• Note that domestic PPI data topped expectations (+10.0% Y/Y vs. BBG median +9.4%) and may have fed into the early, limited downtick in the JGB space.
• 10-Year JGBi supply came and went without much fuss, passing smoothly enough, with no lasting, tangible reaction in breakevens as the cover ratio moderated a touch vs. prev. auction levels.