Futures Holding In Positive Territory But Off Post-20Y Auction Highs

JGB futures are maintaining a positive stance, +10 compared to settlement levels, albeit slightly off the session's peak reached in the afternoon session. JBZ3 initially gapped higher after the lunch break, hitting a new high for the Tokyo session at 145.75. This upward momentum followed a well-received 20-year bond auction.

• Several factors contributed to the success of this month's 20-year auction, including the near-highest outright yield since January, the steepest 10/20 yield curve since March, and the favourable pricing of the 20-year bonds relative to the 10/20/30-year butterfly.
• Outside of the previously outlined international investment flows and core machine orders data, the local calendar also saw July (F) data for industrial production and capacity utilisation. IP printed -1.8% m/m versus -2.0% prior, while capu showed -2.2% m/m versus +3.8% prior.
• The cash JGB curve has twist-flattened, pivoting at the 3s, with yields 0.4bp higher to 4.0bp lower. The benchmark 10-year yield is 0.6bp lower at 0.707%.
• The 20-year benchmark is 2.4bp lower on the day at 1.425% versus 1.443% prior to the auction results.
• The swaps curve bull flattens, with swap spreads generally wider beyond the 3-year.
• Tomorrow the local calendar is light with the Tertiary Industry Index as the sole release.