Futures Near Session’s Worst Levels, Retail Sales & 2Y Supply Tomorrow

JGB futures were weaker and near Tokyo session lows, -19 compared to the settlement levels.

• The local calendar is empty today, ahead of Retail Sales and weekly International Investment Flow data tomorrow. Thursday also sees 2-year supply.
• Cash JGBs are dealing mixed, with yield changes bounded by -0.5bp (4-year) to +2.9bps (40-year). The benchmark 10-year yield is 1.1bp higher at 1.015% versus the cycle high of 1.101%. This is the first time the 10-year yield has pushed above 1% since June 12 as traders continue to mull the central bank’s plan to cut its debt purchases.
• (Bloomberg) “The supply dynamics favor a steeper yield curve for Japan’s government bonds and for super-long tenors to underperform relative to swaps. The nervousness of JGB investors about planned reductions in the Bank of Japan’s bond purchases can be easily understood when we look into the supply of debt.” (See link)
• The swaps curve has bear-steepened, with rates flat to 5bps higher. Swap spreads are mostly wider.
• Tomorrow, the local calendar will see Retail Sales and weekly International Investment Flow data alongside 2-year supply.