Futures Look Through Overnight Low, Before Bouncing

JGB futures opened on the backfoot as Tokyo reacted to overnight moves in both the contract and wider core global FI markets (see Germany & the UK), although the recovery from Tuesday cheaps in U.S. Tsys probably limited the degree of follow through.

• JGB futures breached their overnight base on the move lower, but quickly bounced from worst levels, leaving the contract -20 at typing.
• Cash JGBs run 0.5bp cheaper to 1.5bp richer at typing, with 20s and 40s outperforming, while 7s and 10s present the only benchmarks which are cheaper on the day, given the overnight move in futures.
• A marginal beat for the latest monthly PPI revisions, as well as incremental revisions higher for the prior month, will have done the early downtick no harm, but the impact of that data wasn’t sticky, given the 1.1ppt moderation in the Y/Y headline rate.
• Note that payside flow in the swap space seemingly contributed to the early JGB cheapening, with the swap curve steepening as rates there push higher and swap spreads widen.