Futures Holding In Positive Territory At Lunch, Awaiting US Payrolls

At the Tokyo lunch break, JGB futures are holding in positive territory at 144.79, +12 compared to the settlement levels, after hitting a Tokyo session high of 144.85.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined labour and real cash earnings, which printed weaker than expected.
• Bloomberg reports that BofA analysts said, “Until US rates volatility subsides, Japan’s policymakers would have to mitigate yen and JGB weakness by utilizing FX intervention and additional bond purchases, which may send a mixed signal to the market,” (See link)
• US tsys are slightly cheaper in the Asia-Pac session ahead of Non-Farm Payrolls later today. Bloomberg consensus expects +170k versus +187k prior. The unemployment rate is forecast to dip to 3.7% from 3.8% prior.
• Cash JGBs are dealing mixed, with the belly of the curve outperforming. Yields are 1.3bps lower (7-year) to 1.1bp higher (40-year). The benchmark 10-year yield is 0.5bp lower at 0.807%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also below the cycle high of 0.814% set yesterday.
• The swaps curve has bull-steepened out to the 7-year, with rates 0.4bps to 1.3bps lower. Beyond the 7-year, rates are 0.5 to 1.1bps lower. Swap spreads are generally tighter across maturities.