Futures Consolidate Overnight Strength

JGB futures are stronger, +26 compared to settlement levels, having consolidated the overnight strengthening sparked by weaker-than-expected EU & US PMIs.

• Weekly investment flows from last week showed offshore purchases of Japanese bonds surged to ¥1131.5bn, the first weekly inflow since the start of July and the largest weekly inflow since early April. In terms of Japan purchases abroad, local investors continued to sell offshore bonds though, -¥263.2bn.
• (DJ) Longer-dated Treasury yields have been hitting the highest levels in more than a decade. Japanese investors, among the biggest holders of U.S. government bonds, seem to be contributing to the surge. Japanese investors may be selling the U.S. 10-year benchmark and buying their country's counterpart as yields look increasingly inviting at home. (See link ICYMI)
• US tsys are observing narrow ranges in early dealing, little meaningful macro news flow has crossed and the USD is marginally pressured. This leaves cash tsys 1bp cheaper to 1bp richer across the major benchmarks, the curve has twist flattened pivoting on 10s.
• The cash JGB curve twist flattened, pivoting at the 2s, with yields 0.3bp higher to 1.3bp lower. The benchmark 10-year yield is 0.9bp lower at 0.665% versus the post-BoJ YCC tweak high of 0.68% set yesterday.
• The swaps curve has bull flattened, with swap spreads wider out to the 20-year.