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The broader defensive tone supported JGB futures in overnight trade, although the contract pulled back from best levels to close +9 vs. Tokyo settlement levels, with the dip from the overnight peak coming alongside a similar move in U.S. Tsys. Technical resistance in the form of the July 7 high (152.59) was not tested.

  • Desks continue to question whether 10s will test/break through the 0% yield level after printing as low as 0.01% (again) on Monday, with most suggesting that a break back into negative territory is somewhat unlikely.
  • Japan's government left its monthly economic assessment unchanged for a third straight month when it released the latest report on the matter on Monday, but upped its assessment of business conditions as the economy continues to recover from the pandemic.
  • Local headlines continue to focus on the COVID situation, with NHK suggesting that Hokkaido prefecture will seek "quasi-virus emergency measures."
  • National CPI data headlines the local docket on Tuesday, with a liquidity enhancement auction for off-the-run JGBs with 5- to 15.5-Years until maturity also due.