Firmer, But Off Best Levels. 10-Year JGB Supply Due

JGB futures finished the Tokyo morning session a little shy of best levels after extending on their overnight bounce, hitting the bell +12. The space largely traded as a function of wider cross-market flows.

• Cash JGBs were ~0.5-2.0bp richer this morning, with 7s and 20s leading the bid. The fact that 7s presented the firmest point on the curve pointed to the potential for a bit of a futures driven move, while the relative underperformance in 10s (which were ~0.5bp richer) vs. surrounding lines signals some wariness/concession ahead of this afternoon’s 10-Year JGB auction.
• Local headline flow was dominated by comments from BoJ senior official Uchida, as he pushed back against any speculation that the BoJ could widen/alter its permitted 10-Year JGB yield trading band, likening such a move to a rate hike, while stressing that Japan doesn’t need to tighten monetary policy.
• Domestic household spending data was a touch firmer than expected but still in negative territory (-2.3 Y/Y vs. BBG median -3.3%).
• The aforementioned 10-Year JGB supply headlines the docket this afternoon.