Futures Dumped Overnight With US Tsys As Recession Fears Pared

In post-Tokyo trade, JGB futures have been aggressively sold, closing -54 compared to settlement levels, after US tsys bear-flattened following stronger-than-expected US data.

• July's advance US retail sales report showed that the recent unexpected pickup in consumer momentum continues. June retail sales came in well above expectations at 1.0% M/M (0.4% expected, -0.2% prior rev from 0.0%).
• Initial jobless claims surprised lower for the second consecutive week with a seasonally adjusted 227k (cons 235k) in the week to Aug 10 after a marginally upward revised 234k (initial 233k).
• Industrial production fell by more than expected in July, at -0.64% M/M (cons -0.3) along with a downward revised 0.3% (initial 0.6) in June and 0.8% (initial 0.9) in May.
• 2-year yields spiked 15bps to 4.10% immediately following the data as investors reduced expectations for aggressive easing by the Fed. The market is pricing ~32bps of easing at the September FOMC, as the probability for a 50bps cut continues to be pared, although the August labour market report is likely to be a key input into the magnitude of any easing. 10-year yields increased 10bps to 3.93% with the curve maintaining its flattening bias from previous sessions.
• Today, the local calendar will see International Investment Flow data and the Tertiary Industry Index alongside 10-year inflation-linked supply.