Futures Holding A Small Gain, BoJ Nakamura View Similar To BoJ Tamura’s

At the Tokyo lunch break, JGB futures are holding a small gain, +6 compared to the settlement levels, after trading in a narrow range during the Tokyo morning 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.
• In keeping 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)
• Cash JGBs are mixed, with the 4-5-year zone outperforming. Yield movements range from 0.3-0.5bp lower (4-5-year) to 0.9bp higher (40-year). The benchmark 10-year yield is 0.2bp higher at 0.654%, 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.