Futures Holding The Uptick In Early Tokyo Trade, 20Y Supply Due

In Tokyo morning trade, JGB futures are holding the uptick, +5 compared to settlement levels.

• Offshore investors continued to buy local bonds last week but were quite modest at just ¥79.3bn, well down on the pace of the prior week. Japan's domestic outflows to offshore bonds surged last week to ¥3631.9bn. This is the strongest weekly outflow since February 2020. Prior to last week's outflow, the trend was for Japanese investors to be modest net sellers of offshore bonds back to the start of July.
• Additionally, core machine orders declined 1.1% m/m and -13% y/y versus estimates of -0.8% and -10.3% respectively.
• Today the local calendar sees later Industrial Production and Capacity Utilisation data, along with 20-year supply.
• The cash JGB curve twist-flattens, pivoting at the 3s, with yields 0.7bp higher to 2.0bp lower. The benchmark 10-year yield is 0.5bp lower at 0.708%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• The 20-year benchmark is 1.2bp lower at 1.437%, ahead of today’s supply. Today's auction comes on the heels of mixed outcomes for September’s 5-, 10- and 30-year JGB supply.
• Swap rates are slightly lower across the curve, with swap spreads wider.