Futures Lower & Swap Spreads Wider, Although Moves Back From Extremes

JGB futures sit 10 ticks away from their Tokyo session low, -33, with some light weakness seen as we head into the last hour of trade. Cash JGBs are mixed, with 7s running ~2.5bp cheaper given the weakness in futures since yesterday’s close (related to moves in wider core global FI markets), while the remainder of the curve sits little changed to 1.5bp richer.

• This comes after solid enough pricing at the latest 2-Year JGB auction built on a light late morning rebound for the space, allowing it to regain some ground after a pick-up in cheapening momentum related to futures breaching their overnight low was seen.
• Elsewhere, swap spreads are wider across the curve, as they have been all day, albeit with swap rates back from session highs.
• There haven’t been any signs of meaningful repatriation of Japanese capital ahead of the turn of the Japanese FY, at least via the weekly MoF flow statistics (although Dai-Ichi Life recently outlined their intention to reshore capital, with a preference for deployment in the super-long end of the JGB curve). Meanwhile, last week saw international investors register the largest round of net weekly sales of Japanese bonds since the run up to the BoJ’s January meeting, although they got nowhere near reversing the prior week’s record net purchases.
• Tokyo CPI data headlines tomorrow’s month-end data deluge, with the monthly labour market report, retail sales and industrial production prints also slated for release ahead of the weekend. Elsewhere, the BoJ will release its quarterly bond purchase plan after the close on Friday.