Futures Firm Overnight But Could Come Under Pressure Early On, 30-Year Supply Due

JGB futures finished overnight trading 12 ticks above Tokyo settlement levels, although the weakness in core global FI markets in lieu of the previously outlined comments from BoE Governor Bailey may mean that the contract comes under pressure in early Tokyo dealing.

• The bear steepening observed in U.S. Tsys into Tuesday’s close (also inspired by Bailey) may translate into steepening pressure on the JGB curve on Wednesday, at least in early Tokyo trade, with the impending round of 30-Year JGB supply another factor to consider when it comes to steepening pressure.
• Note that market data vendors indicated that cash 10-Year JGBs failed to trade on Tuesday. That represents the third consecutive day of no trades in that benchmark, the longest streak observed since ‘99.
• An FT interview with PM Kishida saw a reiteration of the need for an overhaul of Japan’s defensive capabilities owing to several well-documented geopolitical threats.
• The aforementioned round of 30-Year JGB supply headlines the domestic docket on Wednesday, with core machine orders and machine tool orders data also due.