Futures Extend Overnight Weakness In Tokyo Morning Trade

In Tokyo morning trade, JGB futures have extended the weakness seen during the overnight session to be -25 compared to settlement levels.

• Japan's September trade data was better than expected from an export standpoint. Export growth came in at 4.3% y/y (3.0% forecast and -0.8% prior). Imports were -16.3% y/y (forecast -12.7%, prior -17.7%). The trade balance printed a surplus ¥62.4bn, versus -¥451.5bn forecast and -¥937.8bn prior. In seasonally adjusted terms, the trade position was closer to expectations, -¥434.1bn, versus -¥553.7bn expected and -¥553bn prior.
• Offshore appetite for Japanese bonds recovered last week. Offshore investors bought ¥947.8bn of local bonds, more than reversing the previous week's outflow. In terms of Japanese outbound flows, local investors bought ¥794bn of offshore bonds.
• Cash JGBs are cheaper, with the belly of the curve underperforming led by the futures-linked 7-year (2.1bps cheaper). The benchmark 10-year yield is 1.8bps higher at 0.827%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also a fresh cycle high.
• Swap rates are higher, with the belly also underperforming. Swap spreads are tighter out to the 10-year and mixed beyond.