Firmer, But Lacking Meaningful Follow Through

JGB futures struggled to detach themselves from late overnight session levels for any meaningful period of time during Thursday’s Tokyo session, with the contract +7 as we move towards the close. Cash JGBs are 0.5-3.0bp richer, with the super-long end outperforming. Swap rates are flat to lower across the curve, lagging the move in JGBs, leaving swap spreads wider.

• A relatively well-received round of 30-Year JGB supply, Sino-U.S. tension re: Taiwan, weakness in crude oil markets & the Nikkei 225/U.S. e-minis, as well as adjustments to Wednesday’s wider moves in core global FI markets, underpinned JGBs for much of the session, although the space has traded away from best levels into the bell.
• Comments from Finance Minister Suzuki & outgoing BoJ Governor Kuroda failed to introduce anything in the way of meaningful, fresh soundbites.
• The weekly international security flow data from the Japanese MoF revealed that international investors were net buyers of Japanese bonds for the second time in 3 weeks, although the record net purchases seen 3 weeks ago continue to dominate when it comes to the assessment of recent dynamics in that metric (as a reminder, the record purchases observed in that week likely represented notable short cover surrounding the most recent BoJ decision and the banking sector tumult).
• Wage and household spending data headline the local docket on Friday.