Futures Lower Overnight, Heavy Local Calendar, 20Y Supply Due

In post-Tokyo trade, JGB futures are weaker, closing -11 compared to settlement levels, after US tsys finished 1-4bps cheaper across the major benchmarks, with the belly underperforming. US tsys were pressured after the July FOMC meeting minutes that were more hawkish than expected. The minutes noted that most participants see significant upside risk to inflation which could require further policy tightening.

• FOMC dated OIS show a marginal winding back of rate cut expectations in 2024, the terminal rate remains steady at ~5.40% in November with ~60bps of cuts to July 2024.
• According to MNI’s technicals team, JGB futures have started the week on the backfoot, but 146.50 contained the sell-off. The phase of weakness that began early last week has largely faded; steering markets clear of a test of key support at the 146.11 low on the continuation contract - last printed back in February. The previous buy-on-dips theme appears to have returned, but any return higher will initially target the May 12 high of 149.21. Clearance of these levels would highlight an important break.
• Today the local calendar sees Trade Balance, International Investment Flow, Core Machine Orders, Tertiary Industry Index and Tokyo Condos For Sale data.
• Today also sees the MoF sell Y1.2tn of 20-year JGBs.