Futures Cheapen Overnight; BoJ Rinban Ops Due

JGB futures recorded modest losses in post-Tokyo trade amidst the cheapening in core global FI markets on Tuesday, with the contract going out a touch above freshly made eight-week lows.

• 10-Year JGB yields remain elevated at ~0.236%, leaving very little room for cheapening in 10s before entering the upper limit of the BoJ’s permitted ~0.250% trading band, keeping in mind the failed challenge of the BoJ’s resolve to maintain its YCC settings in June.
• Elsewhere, participants may be on the lookout for intervention from the BoJ amidst a continued rise in USD/JPY (peaking a little above 143.50 earlier) on a surge in U.S. Tsy yields, with U.S. 10-year real yields rising by ~15bp on Tuesday, taking it just shy of its early 2019 highs (~88bp).
• Looking ahead, BoJ Rinban operations covering 1- to 10-Year JGBs will headline the domestic docket, with flash readings for the July leading and coincident indices due later in the session.