Futures Cheaper Despite US Tsys' Twist-Flattening, Light Calendar

In post-Tokyo trade, JGB futures are weaker, closing -15 compared to settlement levels, despite the US tsy curve twist-flattened during the NY session. Yields finished 6bps higher to 6bps lower, with the short end pressured by slightly better-than-expected US flash PMIs. Both the manufacturing and services indices are at or above 50. Lacklustre demand metrics observed at the $51bn 2-year auction also appeared to weigh on the short end of the US curve.

• There was also spillover selling from China headlines noting an extra 1TN in Yuan sovereign bond issuance and a raising of the fiscal deficit ratio to ~3.8% from 3.0%.
• US equities posted decent gains and the USD strengthened after weak European PMI data. The data only served to highlight the gulf between the better-performing US economy and sluggish growth across Europe.
• Oil prices declined 2% as ongoing diplomatic measures and the freeing of some hostages delayed the much-feared Israeli ground assault on Gaza.
• Today, the local calendar sees Leading and Coincident Indices for August (Final) alongside a Liquidity Enhancement Auction for 15.5-39-year JGBs at 1700 JT.