Futures Holding Richer, Narrow Range, June National CPI Tomorrow

In the Tokyo afternoon session, JGB futures are holding firmer, +12 compared to the settlement levels, after trading in a relatively narrow range.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined trade balance data that surprisingly printed a trade surplus.
• Accordingly, local participants have likely been on headlines and US tsys watch.
• Cash tsys sit 0.5-1.5bps cheaper across the major benchmarks, with the curve steeper. US tsys appear to have been pressured by spillover from ACGBs after the Australian unemployment rate held steady at 3.5% in June. However, the move did not follow through and tsys pared losses. Narrow ranges were observed for the remainder of the session as little meaningful macro news flow crossed.
• The cash JGB curve bull flattened in the afternoon session with yields 0.3bp to 4.0bp lower (40-year) The benchmark 10-year yield is 0.7bp lower at 0.459%, below BoJ's YCC limit of 0.50%.
• The swaps curve has also bull flattened with swap spreads tighter out to the 10-year and wider beyond.
• Later today the local calendar sees June data for Machine Tool Orders (Final).
• Tomorrow the local calendar releases National CPI data for June and International Investment Flows (July 14).
• Tomorrow the MoF will also conduct a Y500bn Liquidity Enhancement Auction for OTR 5-15.5-year JGBs.