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Futures Holding Overnight Weakness, Tokyo CPI Fails To Boost Market

JGBS

JGB futures are holding the overnight cheapening in early Tokyo trade, -32 versus settlement levels.

  • Tokyo CPI prints a headline rate of 3.2% y/y in May versus expectations of 3.4%. The core measure (ex-fresh food) prints 3.2% y/y (3.4% est.), while core-core (excluding energy as well), shows 3.9% y/y (3.9% est.). However, PPI services for April print at the March rate of 1.6% y/y versus expectations of 1.4%. The data initially spurred a slight increase in JGB futures during early Tokyo trade, but the effect has since diminished.
  • BoJ Governor Ueda’s desire to hold on to policy flexibility appears to have been taken as somewhat hawkish. However, the comments didn’t appear to present anything new.
  • Cash JGBs are cheaper across the curve apart from the 2-year zone which is 0.1bp lower. The benchmark 10-year yield is 2.4bp higher at 0.451%, below the BoJ's YCC limit of 0.50%. The 40-year continues to underperform on the curve after yesterday’s supply. The yield is 3.1bp higher at 1.502% after rising 1.3bp yesterday.
  • The swap curve bear steepens with swap spreads wider.
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