Futures Extend Post-Tokyo Trade Weakness Seen Ahead of Weekend

JGB futures extend post-Tokyo trade weakness seen ahead of the weekend in early Tokyo trade, -20 versus settlement levels.

• The Jibun Bank Services and Composite PMIs (final) declined to 54.3 and 55.9 from 54.0 and 56.3 respectively.
• With the domestic calendar light, local participants are likely to continue to monitor US tsys after they weakened sharply in Friday trade following an upside surprise from May non-farm payrolls. Cash tsys are 0.9-3.5bp cheaper in early Asia-Pac trading with the curve flatter.
• Bloomberg reports that foreign tourists packing flights to Japan are helping the economy climb out of a recession with spending power that is also fuelling upward pressure on hospitality-sector pay and prices. (link)
• Cash JGBs are cheaper with yields higher beyond the 2-year zone. Yields are 0.5-2.2bp higher across benchmarks with the futures linked 7-year zone leading. The benchmark 10-year yield is 1.3bp higher at 0.427%, below the BoJ's YCC limit of 0.50%.
• The 30-year JGB yield is 0.8bp higher at 1.282% ahead of tomorrow’s supply.
• The swaps curve bear steepens with rates 0.2bp to 2.1bp higher and swap spreads wider.