Futures Away From Overnight Peak

JGB futures have pulled further away from their overnight peak in early Tokyo dealing, with the contract still a comfortable ~30 ticks higher on the day, as participants adjust for the late Friday pullback in U.S. Tsys, which has held in early Tsy futures trade.

• We also note a 1.1% uptick in the Nikkei 225, which may be applying some pressure to futures.
• Cash JGB trade sees the major benchmarks run 0.5-2.5bp richer with 7s leading the bid. Meanwhile, swaps have lagged the moves in JGBs resulting in swap spread widening early this week.
• Also note that our policy team have flagged their understanding that the BoJ may be leaning towards taking its overnight rate out of negative territory rather than raising the upper limit of its yield control range in response to rising inflation and to ease speculative pressure as other major central banks tighten policy.