Futures Holding Stronger At Lunch, Rinban Results Supportive

At the Tokyo lunch break, JGB futures are stronger but are well off the session’s best level, +10 compared to the settlement levels.

• “A prominent minister running Japan’s digital agency left the door open for a bid to become prime minister as he called on the central bank to increase interest rates to boost the value of the yen and bring down energy and food costs. Impact of data”, as per BBG.
• Large Japanese manufacturers grew more optimistic about business in July, while the service sector's outlook dimmed, according to the Reuters Tankan survey.
• With the domestic calendar light today, futures move away from session bests most likely reflecting the 1-2bps cheapening in cash US tsys in today’s Asia-Pac session.
• Nevertheless, cash JGBs are richer across benchmarks, with yields flat to 1.5bp lower. The benchmark 10-year yield is 1.2bps lower at 1.016% versus the cycle high of 1.108%.
• This morning’s BoJ Rinban operations saw negative spreads and mostly lower cover ratios (1-3-year: 3.39x, 5-10-year: 1.78x and 10-25-year: 1.38x), which may generate some slight support in early rounds of the Tokyo afternoon session.
• Swap rates are lower across maturities, with the curve flatter and swap spreads tighter.