Futures Pare The Early IP-Induced Spike Higher

In Tokyo morning trade, JGB futures are slightly stronger, +1 compared to settlement levels, after paring early strength. The early spike likely reflected news that Industrial Production declined 7.5% m/m in January versus -6.8% est. and +1.4% prior. Retail Sales, however, rose a stronger than expected +2.3% y/y in January versus +2.0 est. and +2.3% prior.

• (Bloomberg) Japan’s factory output fell the most since the height of the pandemic, clouding the prospects for a recovery after the economy fell into recession at the end of last year. (See link)
• Recent weakness in JGB futures resulted in a low print of 145.75, on Feb 14. A stronger reversal is required to signal the end of the recent corrective phase, according to MNI’s technicals team. The bull trigger has been defined at 147.74, the mid-January high. A break would resume the uptrend. Moving average studies remain in a bull-mode set-up, highlighting an uptrend. For bears, a resumption of weakness would potentially open the 144.60 support.
• Cash JGBs are little changed out to the 10-year and 1-3bps cheaper beyond. The benchmark 10-year yield is unchanged at 0.701% versus the Nov-Dec rally low of 0.555%.
• The swaps curve has bear-steepened, with rates flat to 2bps higher. Swap spreads are mixed.