Futures Lower Overnight, JPX Points To Continued Short Cover By Foreigners

JGB futures shed 17 ticks in overnight dealing, going out just above worst levels, with pressure in core global fixed income markets and an uptick in equities weighing, as wider focus fell on the potential for the frontloading of economic support in China.

• Participants will have to balance up the support that came in after Thursday’s solid round of 30-Year JGB supply vs. the impetus derived from international market spill over when assessing early market direction.
• Note that JPX data, released late on Thursday, revealed continued short covering of the wider net short position held by foreign investors last week, albeit at a slower rate than what was observed in the previous week (similar to what we suggested on the back of the weekly international security flow data).
• Japan’s household spending data for May has already hit, coming out on the soft side as it provided an unexpected dip in both M/M and Y/Y terms.
• Looking ahead, BoP data and 3-month bill supply present the highlights of Friday’s local docket.