Futures Extend Overnight Gains After A Weaker Than Expected Data Drop

In Tokyo morning trade, JGB futures have slightly extended overnight gains, +10 compared to settlement levels, after a weaker-than-expected data drop.

• Japan’s economy expanded at a slower pace than initially estimated as businesses cut back investment in plants and equipment and consumers spent less, an outcome that points to the fragility of the growth achieved last quarter. GDP grew at an annualised 4.8% from the previous three months. That was a smaller expansion than the preliminary reading of 6% and came in below economists’ forecast of 5.6% growth. (See link)
• Earlier, labour and real cash earnings for July printed well below expectations at +1.3% y/y and -2.5% y/y versus estimates of +2.4% and -1.4% respectively. Also, Japan’s current account surplus was at Y2.77tn in July versus an estimate of +Y2.18tn.
• Cash JGBs are slightly mixed, with yield changes bounded by +/-0.4bp. The benchmark 10-year yield is 0.3bp lower at 0.653%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• The swap curve has slightly bull-flattened, with swap spreads tighter.