Futures Cheaper But At Tokyo Session Bests

JGB futures remain weaker, -16 compared to settlement levels, but are at Tokyo session highs.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined offshore M2 & M3 money stock and international investor flows.
• Given that, local participants appear to have been also interested in Asia-Pac dealings for US tsys after yesterday's heavy post-CPI NY session. US tsys have moved away from lows seen in yesterday's NY session in Asia-Pac dealings. This leaves cash tsys 2-3bps richer across the major benchmarks.
• The cash JGB curve has seen a twist-steepening, pivoting at the 3s, with yields 0.5bp lower to 1.1bps higher. The benchmark 10-year yield is 0.5bps higher at 0.763%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814% set late last week.
• The swaps curve is dealing mixed, with rate movement bounded by 0.1bp lower (10-year) and 2.5bps higher (40-year). Swap spreads are tighter out to the 30-year.
• On Monday, the local calendar sees Industrial Production and Capacity Utilisation for August, along with BOJ Rinban Operations covering 1-10-year and 25-year+ JGBs.