Futures Holding A Small Gain, BoJ Nakamura Comments, Q2 GDP Partials Tomorrow

In the Tokyo afternoon session, JGB futures are holding a small gain, +5 compared to the settlement levels, after trading in a narrow range during the Tokyo session.

• In addition to the previously outlined mixed activity data for July and weekly international investment flow data that showed offshore selling of Japanese bonds, local participants have also had a speech from BoJ Member Nakamura to digest.
• That said, Nakamura’s comments were consistent with the core message from yesterday’s speech from Tamura. Nakamura stated that more time is needed before turning toward tightening policy, given the lack of conviction for achieving the BOJ’s 2% inflation goal in a stable manner. He added that Japan’s inflation is led by cost-push factors and not by wage growth. (See link ICYMI)
• Cash JGBs are mixed, with the 3-5-year zone outperforming. Yield movements range from 0.2-0.6bp lower (3-5-year) to 0.5bp higher (2-year, 20-year and 40-year). The benchmark 10-year yield is 0.1bp higher at 0.653%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• Swap rates are higher out to the 30-year, with pricing +0.3bp to +0.8bp. The 40-year swap rate is 0.2bp lower. Swap spreads are wider, apart from the 40-year.
• Tomorrow the local calendar sees Capital Spending and Company Profits for Q2, along with Jibun Bank PMI Manufacturing for August (Final).