Futures Extend The Overnight Richening In Tokyo Trade Ahead Of 5-Year Supply

JGB futures are slightly stronger than the overnight close, +18bp compared to settlement levels.

• M2 and M2 money stock data print +2.6% y/y and +2.1% y/y respectively after +2.7% and +2.1% in May. June preliminary machine tool orders are out later today.
• With little in the way of domestic headlines, local participants appear to be digesting yesterday's richening in US tsys, which was driven by the biggest drop in used car prices since April 2020 and moderately dovish Fedspeak. Cash tsys have opened dealing little changed from yesterday's closing levels in a muted start to Tuesday's trade.
• Cash JGBs are dealing mixed in the Tokyo morning session with the belly of the curve outperforming. The benchmark 10-year yield is 0.2bp lower at 0.46%, below the BoJ's YCC limit of 0.50%. The 30-40-year zone is 1.1bp cheaper.
• The 5-year benchmark is dealing 0.4bp lower at 0.118%, showing little concession, ahead of today’s supply. The current outright 5-year yield, aligning with the level observed during the May offering, coupled with diminishing expectations of policy adjustments by the BoJ in the coming months, could potentially lead to a stronger takedown during today's auction compared to the previous month.
• Swap spreads are tighter across the curve apart from the 7-year.