Futures Extend The Overnight Uptick After Mixed Data

In Tokyo morning trade, JGB futures have extended the overnight uptick, +8 compared to settlement levels.

• Offshore flows into Japanese bonds were negative last week, -¥551.5bn yen, albeit only partially unwinding the prior week's inflow. Still, offshore investors have sold Japanese bonds in 6 out of the last 7 weeks. In terms of Japan's outbound flows, local investors bought offshore bonds, +¥425.1bn, reversing the sale trend seen in the prior 2 weeks.
• July activity figures were mixed. Preliminary industrial production figures were weaker than expected printing at -2.0% m/m (-1.4% forecast, 2.4% prior), taking the y/y pace to -2.5% (-1.4% forecast, flat prior). However, retail sales printed better than expected for July, rising +2.1% m/m (0.8% forecast, prior -0.6%). This took the y/y pace to +6.8% (+5.5% forecast, prior +5.6%).
• Cash JGBs are mixed, with the 3-5-year zone outperforming. Yield movements range from 1.1bp lower (5-year) to 0.2bp higher (30-year). The benchmark 10-year yield is unchanged at 0.652%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• Swap rates are also mixed, with pricing 0.1bp higher (1-year) to 1.1bp lower (40-year). Swap spreads are narrower beyond the 5-year.