Futures Pare Overnight Losses After Lower Than Expected Tokyo CPI Data

In Tokyo morning trade, JGB futures are slightly weaker, -5 compared to settlement levels, after paring overnight losses following lower-than-expected Tokyo CPI data across all measures.

• The core CPI (excluding fresh food) in the Tokyo area, a leading indicator of the national average, rose 2.3% in November, slower than the 2.7% growth in October. The core-core CPI (excluding fresh food and energy) -- a key indicator of the underlying trend of inflation -- nudged lower to 3.6% y/y in November, following 3.8% y/y in October.
• (Bloomberg) If the BOJ surprised the markets last December by tweaking its control of the yield curve, this month the market dynamics seem to be arguing more and more in favour of the central bank staying on hold. Even so, the yen may find some support. (See link)
• Cash JGBs are slightly mixed, with yield movements bounded by +/-0.5bp. The benchmark 10-year yield is 0.1bp higher at 0.697% versus Monday’s low of 0.638%. 10-year supply is due today.
• Swaps are also dealing mixed, with the belly outperforming. Swap spreads are generally tighter apart from the very short end and the 40-year.