Futures Holding Near Overnight Levels In Morning Trade, 10YY Closing In On The Cycle High

In Tokyo morning trade, JGB futures are weaker and holding near overnight closing levels, -29 compared to settlement levels.

• Weekly investment flow data showed that offshore investors had reversed nearly all of the prior week's inflow, with an outflow of -¥904.2bn. The general trend since mid-September has been for outflows (a cumulative -¥2594.9bn), which fits with a firmer Japan yield backdrop over this period.
• In terms of Japan's domestic outflows, local investors sold foreign bonds (-¥151.7bn). Still, the general trend in recent months has been to purchase offshore bonds.
• Also, note Nippon Life stated it would buy/sell foreign bonds flexibly as yields and FX shift (see this link).
• PPI services data for September printed unchanged at +2.1% y/y versus expectations of +2.0%.
• Cash JGBs are cheaper, with the belly of the curve underperforming. The benchmark 10-year yield is 1.7bps higher at 0.875%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also just shy of the cycle high of 0.882% set on Monday.
• The swaps curve has twist-steepened, pivoting at the 3s, with rates 0.2bp lower to 1.4bps higher. Swap spreads are generally tighter.