Futures Holding In Negative Territory After Domestic Data Drop

In Tokyo morning trade, JGB futures are holding overnight weakness, -7 compared to settlement levels, after reversing early strength.

• In addition to Tokyo CPI data that printed lower than expected for the core and core-core measures, today’s domestic data drop printed stronger than expected annual industrial production (-3.8% y/y vs. -4.6% est.) and retail sales (+7.0% y/y vs. 6.6% est.). Additionally, Dept. Store, Supermarket Sales printed +6.0% y/y vs. 5.5% prior. Later today sees Housing Starts and Consumer Confidence data.
• Cash JGBs are slightly cheaper, apart from the 30-year that is dealing 0.1bp lower. The benchmark 10-year yield is 0.5bp higher at 0.766%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also a fresh cycle high.
• The swap curve has bull-flattened beyond the 5-year, with rates 0.9bp to 1.3bp lower. Out to the 4-year swap rates are mixed. Swap spreads are tighter across maturities.
• (Bloomberg) Japan’s government bonds are set for the worst quarterly selloff in more than two decades as the central bank loosens its grip on the market. That’s a reminder for investors that the nation’s debt market relies in part on support from public-sector institutions like the Bank of Japan to outperform global peers. (See link)