Futures At Session Highs After Weaker Than Expected Data

JGB futures build on overnight strength in early Tokyo trade to be currently trading at 148.76, +22 versus settlement levels, as the economic data drop prints on the weaker side of expectations.

• April retail sales fell -1.2% m/m, versus +0.5% forecast, while March was also revised down a touch. The y/y pace eased back to 5.0%, also below the 7.1% forecast. The y/y trajectory still looks skewed higher, but the authorities will be hoping that lowered covid restrictions and higher tourism arrivals keep driving a spending recovery.
• On the IP side, we also saw a softer outcome in relation to expectations. M/M was -0.4%, (1.4% forecast), while the y/y print was -0.3%, similar to last month. The y/y pace has been around flat for a number of months now.
• "There are many issues that need to be better understood regarding inflation expectations," said BoJ Governor Kazuo Ueda at the BoJ International Conference.
• Cash JGBs twist flatten in early Tokyo trade with yields lower beyond the 1-year zone. The benchmark 10-year yield is 1.3bp lower at 0.422%, below the BoJ's YCC limit of 0.50%. The outperformer on the curve is the 20-year zone, which is 2.2bp lower.
• The swaps curve bull flattens with rates 0.2-2.2bp lower. Swap spreads are mixed, narrower out the 4-year zone and generally wider beyond.