Futures Holding Weaker, 40Y Outperforms Ahead Of Supply

In Tokyo morning trade, JGB futures are holding weaker, -12 compared to settlement levels.

• According to MNI’s technicals team, JGB futures sold off on the Tuesday BoJ decision. This erased a large part of a recovery rally above initial resistance at 146.52, the Dec 7 high. While this opened resistance at 148.74 further out, the current corrective cycle shows that gains won’t be one-directional. 144.60 marks initial support, weakness through which would open the Oct 31 low of 143.44.
• Offshore purchases of Japanese bonds continued last week, albeit at a reduced pace compared to the previous week. Net bond inflows totalled ¥348.6bn. It was the second consecutive week for bond inflows, but the trends have been more mixed in terms of flows into this segment since late 2023. Regarding Japan's domestic flows, local residents were modest net sellers of offshore bonds, but this only modestly offset the strong outflows seen in the prior week.
• Later today, the local calendar sees Tokyo Condominiums for Sale, Dept Store Sales and Machine Tool Orders data.
• The cash JGB curve bear-steepens out to the 30-year. The 40-year is flat at 2.084% ahead of today’s supply. The benchmark 10-year yield is 1.8bps higher at 0.735% versus the Nov-Dec rally low of 0.555%.
• The swaps curve has also bear-steepened, with rates flat to 2bps higher. Swap spreads are generally tighter across maturities.