Futures Back Into Positive Territory At Lunch Despite Q2 GDP Beat

At the Tokyo lunch break, JGB futures are stronger, +11 compared to the settlement levels, after reversing the sell-off sparked by the much stronger-than-expected Q2 GDP print.

• A paring of the early Asia-Pac cheapening in US tsys is likely to have assisted the turnaround in JGB futures.
• Cash JGBs are mixed across the curve, with yield movements ranging from -0.9bp (5-year) to +0.7bp (10-year). The 10-year yield is at 0.619%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• The benchmark 5-year JGB is outperforming on the curve, showing no concession, ahead of today’s supply. The 5-year yield is at 0.193%. The highest outright 5-year yield level since March combined with expectations of ongoing monetary easing could potentially assist the takedown of today's auction, although lower demand is likely after last month’s stellar performance.
• The swap curve twist flattened at the lunch break, pivoting at the 3s, with rates 0.3bp higher to 1bp lower. Swap spreads are tighter beyond the 2-year.