Futures Extend Weakness Seen Ahead Of Weekend, Tankan Report Mixed

In Tokyo morning trade, JGB futures have extended weakness ahead of the weekend, -40 compared to settlement levels.

• Japan's Tankan data print was mixed. Large manufacturing sentiment was slightly better than forecast For Q2. The headline index rose to +13, versus +11 forecast and +11 prior. The outlook for this segment was also better than forecast (+14, +11 forecast and +10 prior).
• For large non-manufacturing firms, the headline was +33 in line with forecasts, but down a touch from Q1's +34. This headline read a touch off the high back to the early 1990s. The outlook was +27 for this segment, slightly below forecasts.
• The Japan 2-year to 10-year yield curve will flatten to 62bps by the end of the third quarter, from the current 69bps, based on Bloomberg surveys of market forecasts.
• Cash US tsys have extended Friday’s weakness in today’s Asia-Pac session. Yields are flat to 2bps cheaper, with a steepening bias.
• Cash JGBs are 1-3bps cheaper, with the belly of the curve leading. The benchmark 10-year yield is 2.8bps higher at 1.085% versus the cycle high of 1.101%.
• The swaps curve has cheapened, with rates 1-5bps higher. Swap spreads are mostly tighter.