Futures Holding Richer, Near Session Highs, Tokyo CPI Tomorrow

JGB futures are stronger, +30 compared to settlement levels, having consolidated the overnight strengthening sparked by weaker-than-expected EU & US PMIs.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined weekly investment flow data that showed offshore purchases of Japanese bonds surged last week, while local investors continued to sell offshore bonds.
• Accordingly, local participants have likely been on headlines and US tsys watch.
• US tsys sit 1bp cheaper to flat across the major benchmarks, light bear flattening is apparent. US tsys trimmed some of yesterday's gains in early dealing, but there was no obvious headline driver for the move which came alongside the USD firming from session lows. Perhaps participants are looking ahead to Fed Chair Powell's speech on Friday, using yesterday's richening as an opportunity to enter fresh short positions.
• The cash JGB curve has twist-flattened, with yields 0.1bp higher to 3.8bp lower (20-year). The benchmark 10-year yield is 1.4bp lower at 0.660% versus the post-BoJ YCC tweak high of 0.68% set yesterday.
• The swaps curve has bull flattened, with swap spreads broadly wider.
• Tomorrow the local calendar sees Tokyo CPI for August and PPI for July. Department Store Sales for July are also on tap.