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Futures Reverse Morning Weakness in Afternoon Trade, 40-Year Outperforms


JGB futures strengthen in the afternoon session, unwinding morning weakness, to be -5 compared to the settlement levels.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Tokyo CPI and PPI Services data.
  • Local market participants seemed content to track US tsys in anticipation of the release of April US PCE deflator data later in the day. US tsys were 1-2bp richer in Asia-Pac trade.
  • Cash JGBs are little changed out to the 10-year zone, but richer beyond. The benchmark 10-year yield is 0.1bp higher at 0.427%, below the morning session high of 0.454%. The 40-year has reversed morning underperformance to be the star performer in the afternoon session. The yield is 2.2bp lower at 1.450% after hitting a morning high of 1.509%.
  • Swap rates are trading mixed with the curve exhibiting a flattening bias. Swap spreads are generally narrower out to the 30-year zone and wider beyond.
  • The local calendar next week sees Leading and Coincident Indicators (Mar F) on Monday, Jobless Rate (Apr) on Tuesday, Retail Sales (Apr), IP (Apr P) and Housing Starts (Apr) on Wednesday, and Capital Spending (Q1) and Company Profits (Q1) on Thursday.
  • The next week also has slated BoJ Rinban operation covering 3-25-year+ JGBs (Mon) along with 2-year (Tue) and 10-year (Thu) supply.

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