Futures Holding In Negative Territory At The Lunch Break

At the Tokyo lunch break, JGB futures pared overnight losses, -11 compared to settlement levels, after dealing a relatively narrow range in the morning session.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Tokyo CPI for August, which was a touch below expectations in terms of the headline and ex-fresh fruit measures.
• Accordingly, local participants have likely been on headlines and US tsys watch.
• US tsys have trimmed early gains as the moves higher have not followed through. Perhaps the proximity to Fed Chair Powell's speech today is limiting activity. US tsys sit flat to 1bp cheaper across the major benchmarks, with the curve steeper.
• Cash JGBs are mixed across the curve, with yield movements bounded by -1.2bp (40-year) and +0.8bp (7-year). The benchmark 10-year yield is unchanged at 0.656%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• Bloomberg reports that implied repo rates for Japan’s government bonds at a six-month high are drawing interest from arbitragers, according to Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo. (See link)
• Swap rates are mixed across the curve, with swap spreads also mixed.