Firming Early On, Data Caps

JGB futures have extended their bounce away from overnight lows in early Tokyo trade, aided by a similar move in U.S. Tsys during the second half of the NY session, leaving the contract +4 at typing, with bulls failing to force a test of the overnight high as of yet, perhaps limited by the better-than-expected industrial production and retail sales out of Japan.

• Cash JGBs are flat to 1bp richer, with the long end seeing some modest outperformance, with bulls potentially leaning on the impending BoJ Rinban operations as a further leg of support.
• Technically, JGBs have traded lower in August, ending the recent consolidation. Still, the trend remains bullish though and the pullback is likely a correction. The contract has recently pierced and closed above the 76.4% retracement of the 2022 downleg. This strengthens a bullish condition and sets the scene for a continuation higher towards levels not seen since March, at 151.13. Support to watch is at 148.80, the Jul 11 low. A break there would threaten the bullish theme.

Fig. 1: JGB Futures (Continuation)

Source: MNI - Market News/Bloomberg