Futures Open Stronger After Yesterday’s Holiday

In Tokyo morning trade, JGB futures are richer, +32 compared to settlement levels, after yesterday’s holiday.

• According to MNI’s technicals team, JGB futures sold off sharply again last week, putting the contract further through support at 145.49, the Aug 17 low. A continuation lower and the clear break of this area confirm a resumption of the medium-term downtrend and pave the way for weakness towards 144.15, the Jan 13 low and major support. On the upside, clearance of 146.41, the Sep 4 high would instead highlight a base and a possible short-term reversal.
• Japan's August current account and trade balance data has printed relatively close to expectations, albeit with a modest downside surprise in the seasonally adjusted current account. This print came in at ¥1634.9bn, versus ¥2407.6bn expected and ¥2766.9bn prior.
• Later today sees the release of the September Eco Watchers Survey.
• Cash JGBs are mixed, with the belly of the curve outperforming. The benchmark 10-year yield is 2.0bps lower at 0.785%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814%, set late last week.
• The swaps curve has bull-flattened, with rates 0.9bp to 4.0bps lower. Swap spreads are tighter across all maturities.
• Today, the BOJ will conduct Rinban operations covering 1-3-year and 5-25+-year JGBs.