Futures Push Into Positive Territory, Rinban Operations Supportive

JGB futures push to new session highs at 148.82 in the Tokyo afternoon session, after this morning’s BoJ Rinban operations saw flat to negative spreads and lower cover ratios. JBU3 is currently trading at 148.80, +4 compared to the settlement levels.

• Slightly higher-than-expected core and core-core CPI readings for May failed to hold the JGB futures in negative territory despite clearly adding to the risks of an upside revision to the BoJ's inflation outlook in July. Market participants appear to have focused on BoJ board rhetoric this week which has pushed back against the need for any YCC tweaks at the July meeting.
• Cash JGB yields have moved lower beyond the 1-year zone. The outperformers on the curve have been the 4-year (1.4bp richer) and 20-year (1.5bp richer) zones. The benchmark 10-year yield is 0.8bp higher at 0.371%, below the BoJ's YCC limit of 0.50%.
• Swap rates are lower across the curve with swap spreads generally tighter.
• The local calendar next week sees PPI Services (Mon), Coincident & Leading Indicators (Tue), Retail Sales (Fri), International Investment Flows (Fri) and Consumer Confidence (Fri).
• BoJ Summary Of Opinions for the June meeting will released on Monday.
• The MoF plans to sell 20-year (Tue) and 2-year (Thu) JGBs next week.