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Futures Add To Overnight Weakness Despite CPI Data Printing Broadly In Line With Expectations


JGB futures have weakened further in early Tokyo trade, -21 compared to settlement levels, despite June national CPI printing broadly in line with market expectations. The early Tokyo session move adds to the overnight cheapening sparked by higher US tsy yields following lower-than-expected initial jobless claims. JBU3 at 147.62 is nonetheless off the session low of 147.49.

  • Headline CPI y/y has held sticky above 3.0% in recent months, although base effects turn more favourable as we progress through Q3, which may at least prevent a re-acceleration in y/y momentum as we progress through H2 (if not some further downside). The core measure (ex-fresh food) is showing a similar trajectory, while the measure which excludes energy as well is just a touch off recent highs at 4.2% y/y.
  • Cash JGBs are cheaper across the curve out to the 30-year zone, with the futures-linked 7-year zone the weakest (1.2bp cheaper). The benchmark 10-year yield is 1.1bp higher at 0.478%, below BoJ's YCC limit of 0.50%.
  • Swap rates are higher across the curve with swap spreads narrower out to the 20-year and wider beyond.
  • Today the MoF will conduct a Y500bn Liquidity Enhancement Auction for OTR 5-15.5-year JGBs.

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