Futures Holding Morning Gains, Narrow Afternoon Range

JGB futures are holding firmer at 148.57, +14 compared to the settlement levels, after strengthening in morning Tokyo trade after the latest data from Japan Securities Dealers revealed trust banks had bought a record amount of super-long JGBs last month as speculation of a possible tweak to the BoJ’s yield-curve control policy receded. JBU3 reached a session high of 148.69.

• There hasn’t been much in the way of domestic drivers to flag, outside of the JSDA announcement.
• The local data calendar saw April Industrial Production (Final) print +0.7% m/m versus -0.4% prior. April Capacity Utilisation rose 3.0% versus +0.8% in March. The final May Machine Tool Orders are due to print at the top of the hour.
• The cash JGB curve bull flattens with yield movement ranging from 0.2bp lower (2-year zone) to 1.8bp lower (30-year zone). The benchmark 10-year yield is 1.0bp lower at 0.390%, below the BoJ's YCC limit of 0.50%.
• The 5-year benchmark is underperforming on the curve ahead of supply later in the week with the yield 0.2bp lower at 0.078%.
• The swap curve has also bull flattened with swap spreads tighter across the curve.
• The local calendar tomorrow sees the BoJ Minutes of the April meeting.