Curve Steepening Resumes

JGB futures coiled during the morning session, hitting the lunch break -24, a little away from worst levels of the session after Tokyo participants facilitated a modest extension through the overnight session base.

• Cash JGBs resumed the steepening trend observed during the first couple of sessions of the week, with the major benchmark JGBs running little changed to 4bp cheaper, as 30s lead the weakness in the longer end of the curve.
• PPI services data for July was 0.1ppt softer than expected, sitting at +2.1% Y/Y, which represented a steady rate of inflation after an upward revision to the June reading.
• Elsewhere, BoJ board member Nakamura stuck to the Bank’s central message i.e. the Bank must persist with its loose policy settings, noting that the Bank is only half way to achieving its inflation target, while underscoring the need for continued wage rises. Nakamura did sound a little more upbeat than some of his colleagues when it came to the potential for an alteration in the Japanese mindset surrounding inflation.
• A liquidity enhancement auction for off-the-run 15.5- to 39-Year JGBs headlines the local docket this afternoon.