Futures Holding Richer, 5-Year Supply Sees Very Strong Demand

In the Tokyo afternoon session, JGB futures are holding firmer, +14bp compared to settlement levels, after today’s supply of 5-year bonds was very well-received. The auction's low price beat dealer expectations, while the cover ratio improved dramatically to 4.680x compared to 3.850x in the previous month's auction. Additionally, the tail decreased to its shortest since February.

• There haven't been many noteworthy domestic factors to highlight, except for the previously mentioned M2 and M2 money stock data, which are unlikely to have had a significant impact on the market. June preliminary machine tool orders are out later today.
• US tsys have extended the strength seen in the NY session in Asia-Pac trading. Cash US tsys are 1-2bp richer than NY closing levels across the benchmarks.
• Cash JGBs are dealing mixed in the Tokyo afternoon session with the belly of the curve outperforming. The benchmark 10-year yield is 0.5bp lower at 0.457%, below the BoJ's YCC limit of 0.50%. The 30-40-year zone is underperforming with yields 1.4-1.7bp cheaper.
• The 5-year benchmark is the outperformer with its yield dealing 2.0bp lower at 0.101%, after today’s supply.
• The swap curve twist steepens, pivoting at the 20-year. Swap spreads are tighter across the curve apart from the 7-year.
• Tomorrow the local calendar sees PPI (Jun) and Core Machine Orders (May) data.