Futures Nudge Away From Lows Overnight, PPI Due

JGB futures followed the cheapening impetus observed in core global FI markets in overnight trade, before seeing a shallow bounce away from session cheaps as U.S. Tsys richened away from cheapest levels of the day. That left JGB futures -11 at the close of post-Tokyo trade.

• There hasn’t been much in the way of meaningful domestic headline flow observed since the Tokyo close.
• The most prominent release was probably a Nikkei interview which saw an executive at MUFG suggest that “if the financial system volatility settles down and inflation remains higher than the BOJ's assumptions, the BOJ may move to reassess the YCC band or remove it entirely during the first half of fiscal 2023.”
• When it comes to the firm’s holdings of international paper, the same interview noted that “MUFG had been minimizing its holdings of foreign bonds, but the bank has rebuilt "a reasonable position" with purchases of U.S. Treasurys between early February and the beginning of March, when U.S. interest rates were rising.”
• MUFG has shortened the average JGB maturity that it holds (to 1.9 years at the end of December ’22 vs. 2.8 years in Mar ’22), while the executive noted that the firm would look to gradually invest in 10s if yields reached 0.80% or higher.
• Wednesday’s local data docket is headlined by the monthly PPI print, with core machine orders and bank lending data also slated.