Futures Lead Early Cheapening

JGB futures have leaked lower in early Tokyo trade, last dealing -10 vs. Wednesday’s settlement levels, pulling further away from the peak that was observed in the overnight trading session before yesterday’s holiday as Tokyo reacts to the moves seen in wider core global bond markets since Wednesday’s domestic session close.

• Broader macro headline flow remains light, leaving position adjustments and cross-asset-related flows at the fore. Cash JGBs run little changed to 1.5bp cheaper across the curve, with 7s leading the weakness on the downtick in futures.
• As we noted elsewhere, the latest round of Japanese weekly international security flow data revealed that last week saw foreign investors buy more than Y1tn of Japanese bonds in net terms for the fourth time in five weeks, with the latest round of purchases likely representing short covering of existing JGB positions, foreign investors looking to take advantage of FX-hedge-related yield pickups, or a mixture of the two.