Futures Pare Overnight Gains After Retail Sales Beats, 2-Year Supply Due

JGB futures pare overnight gains in early Tokyo trade, +12 compared to settlement levels, after retail sales surprises on the upside. Retail sales rose 1.3% in May from a month earlier (+5.7% y/y), compared to the median estimate of +0.8% (+5.2% y/y).

• According to the MoF, Japan's securities transactions data for the week ended June 23 revealed a total net outflow of Y3.3tn. During this period, Japanese investors purchased Y155.6bn worth of foreign bonds, which was significantly lower than the Y1.036tn purchased in the previous week. Meanwhile, foreign investors sold Y560.9bn in Japanese bonds, following their sales of Y632.9bn in the previous week.
• Consumer Confidence (June) will be released later today.
• Bloomberg Economics believes Japan’s labour market likely tightened in May. This would reflect strong hiring demand in the service sector and more need for autoworkers as supply-chain disruptions ease. (See link)
• Cash JGBs are richer beyond the 2-year zone with the 20-year zone leading (0.5bp richer). The benchmark 10-year yield is 0.4bp lower at 0.385%, below the BoJ's YCC limit of 0.50%.
• The 2-year benchmark yield is 0.1bp higher at -0.065%, showing a slight concession on the curve ahead of today’s supply.
• Swap rates are flat to 0.3bp lower with swap spreads generally wider.