Futures Extend Overnight Weakness, 20-40Y Zone Underperforming

In Tokyo morning trade, JGB futures have extended overnight weakness, -47 compared to settlement levels, after setting a new pullback low of 144.62 following a solid post-US CPI sell-off.

• According to MNI’s technicals team, a stronger reversal higher is required to signal the end of the recent corrective phase. The bull trigger has been defined at 147.74, the mid-January high. A break would resume the uptrend.
• Offshore investors returned to net sellers of local bonds, continuing somewhat of a see-saw pattern. Net flows into local bonds have been close to flat since early March. In terms of Japan's outbound flows, we saw some buying off offshore bonds, but this only modestly offsets last week's net selling.
• M2 & M3 Money Stock rose 2.5% y/y and 1.8% y/y respectively in March.
• (MNI) TOKYO - Corporate goods and services price revisions made available around October and following the publication of revised wage-hike data at smaller firms will fuel chances of a Bank of Japan rate hike later in the year, MNI understands. (See MNI Policy MainWire for more details)
• Cash JGBs are sharply cheaper, beyond the 1-year, with the 20-40-year zone underperforming (around 5bps cheaper). The benchmark 10-year yield is 3.4bps higher at 0.840%, a fresh YTD high.
• The swaps curve has bear-steepened, with rates flat to 6bps higher. Swap spreads are mixed.