Firm Ahead Of 10-Year Supply, Long End Lags A Little

Futures held on to their overnight gains, hitting the lunch bell +5 vs. yesterday's settlement, respecting the range established during after-hours trade. The major benchmarks across the cash JGB space richened by 0.5-1.5bp, with the front end and belly leading the way, prompting some light bull steepening, with that dynamic perhaps aided by the proximity to this afternoon's 10-Year JGB auction.

• The Q2 BoJ Tankan survey disappointed across the board, excluding a larger than expected uptick in the CapEx plans amongst large firms. The remainder of the metrics covering large firms represented firmer prints vs. Q1, although disappointed vs. consensus, while the major metrics covering small firms weren't quite as negative as the corresponding Q1 readings, but still disappointed vs. broader exp. Firms continue to see very moderate inflationary pressures over a 5 year horizon.
• Recent headlines covering comments from Japanese chief cabinet secretary Kato noted that the ruling LDP party is not considering drawing up a supplementary budget/extra economic measures at present.
• The aforementioned round of 10-Year JGB supply headlines the local docket this afternoon.