Futures Higher But Below Tokyo Session Highs, BOJ Noguchi Speech

At the Tokyo lunch break, JGB futures are richer at 145.49, +25 compared to the settlement levels, but below the morning high of 145.58.

• In addition to the previously outlined domestic data drop, which included PPI data, local participants have had to digest a speech from BOJ Board Member Noguchi. Noguchi stated that “the biggest focus is whether wage hike momentum will be maintained or not.” He added that “Japan needs to shake off the 'zero norm' of prices and wages in order for a nominal wage increase to exceed 2% as a trend” and “3% nominal wage growth would correspond with 2％ inflation target”.
• Local participants have also likely been on US tsys watch. US tsys have been marginally pressured in recent dealing, although there hasn’t been any headline driver. Perhaps local participants are using the recent richening to close long positions ahead of this evening’s CPI print. Cash US tsys sit ~1bp cheaper across the major benchmarks.
• The cash JGB curve has bull-flattened beyond the 1-year (+0.7bp), with yields 0.1bp to 4.9bps lower. The benchmark 10-year yield is 1.1bps lower at 0.758% versus the cycle high of 0.814% set late last week.
• The swaps curve has twist-flattened, pivoting at the 3s, with rates 0.1bp higher to 1.4bps lower. Swap spreads are tighter out the 4-year and wider beyond.