Futures Pare Overnight Losses After Tokyo CPI Undershoot

JGB futures have pared overnight losses, 11 compared to settlement levels, in morning Tokyo trade after the release of Tokyo CPI data for August.

• Tokyo's August CPI was a touch below expectations in terms of the headline. We printed at 2.9% y/y, versus 3.0% projected and 3.2% prior. The ex-fresh food measure also came in below expectations at 2.8% y/y (2.9% forecast and 3.0% prior). The headline measures are largely evolving as expected, now comfortably off early 2023 peaks (4.4% y/y for the headline).
• The ex-fresh-food, energy measure was in line with consensus though at 4.0% y/y, which was also the prior outcome and remains at cyclical highs. The core measure which strips out all food and energy ticked higher to 2.6% y/y from 2.5% in July.
• PPI Services for July surprises on the upside printing +1.7% y/y versus expectations of +1.3%.
• Cash JGBs are mixed across the curve, with yield movements bounded by -0.5bp (40-year) and +0.7bp (7-year). The benchmark 10-year yield is unchanged at 0.656%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• Swap rates are mixed across the curve, with swap spreads also mixed.