Futures Benefit From Credit Suisse Worry

Bank sector worries, centred on Credit Suisse, allowed JGB futures to rally by over 100 pips during the overnight session, although Swiss regulators loosely outlining a liquidity lifeline for Credit Suisse, if needed, saw the risk-off moves moderate from extremes, leaving futures over 50 pips shy of their post-Tokyo high.

• Futures breached their recent highs overnight. Any breach of the overnight top will switch focus to the November high.
• When it comes to the local corporate borrowing space it is worth noting that BBG have flagged that “companies like Japan Airlines Co. are choosing bank loans over bonds for longer-term funding needs as investors bracing for an end to the era of ultra-cheap money drive up yields.”
• The latest North Korean missile launch, which comes ahead of today’s Japan-South Korea summit, has stolen most of the local headline space in the time since the Tokyo close.
• Elsewhere, speculation is rife that the BoJ may cut the size of its 10- to 25-Year JGB purchases at the next round of operations covering that bucket. This comes after yesterday’s operations saw a lower than guided round of purchases in the 25+-Year bucket, with curve flattening (the BoJ has always been keen on a steeper yield curve, owing to the feedthrough into bank profits) and the pull away from the YCC cap in 10-Year yields.
• Trade balance and core machine orders headline the domestic data docket today, with final industrial production also slated. Elsewhere, 20-Year JGB supply will cross.