Futures Recover From Weakness Seen Post-40Y Auction

JGB futures are weaker, -11 compared to settlement levels, but off session lows seen in the aftermath of today’s lacklustre 40-year auction.

• The issuance of 40-year bonds today encountered a tepid reception, with the actual high yield overshooting dealer expectations. As per the BBG poll, the anticipated yield was projected at 2.385% versus the realised yield of 2.42%. Given that today's auction followed solid demand metrics at July's 20- and 30-year JGB auctions, the result has been deemed poor.
• Outside of the previously outlined Preliminary Jibun Bank PMIs, there hasn't been much in the way of domestic data drivers to flag.
• Cash US tsys are slightly richer in today's Asia-Pac session, with equity weakness supporting the move.
• Cash JGBs are cheaper across benchmarks, with yields 1-4bps higher. The benchmark 10-year yield is 1.1bps higher at 1.076% versus the cycle high of 1.108%.
• The 40-year yield is 3.9bps higher at 2.467% following today’s supply results.
• Swap rates are little changed out to the 30-year, and 3bps higher beyond. Swap spreads are tighter.
• Tomorrow, the local calendar will see PPI Services, Weekly International Investment Flow and Department Store Sales data ahead of Tokyo CPI on Friday.