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Futures Holding Post-GDP Gains

JGBS

In afternoon dealings, JGB futures remain sharply richer and close to session highs, +39 compared to settlement levels.

  • Outside of the previously outlined Q4 GDP data, which printed weaker than expected and signalled a technical recession, the local calendar showed Industrial Production (Final) and Capacity Utilization data for December. IP was revised down to 1.4% m/m (-1.0% y/y) versus 1.8% and -0.7% prior. Meanwhile, Capu printed -0.1% versus +0.3% prior.
  • At face value, today’s data should diminish BoJ prospects for a near-term shift away from NIRP (say at the March meeting).
  • (DJ) Japan dropped a rank to become the world's fourth-largest economy after a weak end to 2023, as growth in tourism spending failed to offset sluggishness in domestic private consumption and capital spending. (See link)
  • Cash JGBs are richer beyond the 1-year, with the futures-linked 7-year leading (yield is 2.7bps lower). The benchmark 10-year yield is 2.6bps lower at 0.727% versus yesterday’s high of 0.765%
  • The swaps curve has bull-flattened, with rates 1-3bps lower. Swap spreads are mostly tighter across maturities.
  • Tomorrow, the local calendar is relatively light, with Weekly International Investment Flows and the Tertiary Industry Index as the only releases. The MoF will also conduct an Auction for Enhanced-Liquidity 15.5-39-years.

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