Futures Lead Weakness In Belly, Steepening Gives Way To Twist Flattening

JGB futures pulled lower at the open, as Tokyo reacted to Friday’s post-NFP cheapening in U.S. Tsys, allowing the contract to take out its overnight session base. Since then, a recovery for U.S. Tsys from worst levels has facilitated a similar move in JGBs.

• That leaves the benchmark futures contract -17 at typing, a little shy of its Tokyo peak after failing to get anywhere near recouping the losses observed since Friday’s settlement. Meanwhile, the early bear steepening impulse witnessed on the JGB curve has given way to twist flattening, with the major benchmarks running 1.5bp cheaper to 0.5bp richer. 7s present the weakest point on the curve, owing to the aforementioned move lower in futures, while 30s are the firmest point on the curve, with the pivot seen at the 20-Year point.
• Lower tier local data and news flow hasn’t impacted the space, with wider cross-asset flows at the fore. Note that the Nikkei has flagged the likelihood of an announcement re: a government cabinet reshuffle on Wednesday.
• Flash machine tool orders data and 30-Year JGB supply headline the domestic docket on Tuesday.