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Futures Downtick, US Tsys Subdued Ahead Of US CPI


In post-Tokyo trade, JGB futures downtick, closing -4 compared to settlement levels, after a subdued NY session for US tsys ahead of US CPI data today. Tsys closed mixed as a flattening bias resumed despite a solid 3-year auction.

  • Consensus puts core CPI inflation at 0.3% M/M in June as it slowed from a modest beat of 0.44% in May. There is no evidence that the downside miss in nonfarm payroll gains last Friday has deterred FOMC participants from signalling their preference to raise rates twice more this year. An above-expected print and/or a report with strong details in ex-shelter services would reinforce the "higher for longer" theme; a miss most impactful for September pricing. See the MNI CPI preview here.
  • According to MNI technical team, JGB futures continue to operate above support at 147.34, the May 26 low. The contract has breached 148.41, the May 12 high. This strengthens a bullish case and signals scope for a climb towards the next key resistance at 149.21/53, highs from May and March. Clearance of these levels would highlight an important break. On the downside, a breach of 147.34 would signal a deeper reversal.
  • Today the local calendar sees PPI (Jun) and Core Machine Orders (May) data.

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