Futures Richer But Gains Ahead Of Weekend Have Been Pared, Rinban Operations Due

In Tokyo morning trade, JGB futures are richer, +10 compared to settlement levels, but have pared overnight gains seen before the weekend.

• According to MNI’s technicals team, JGB futures have sold off sharply in recent weeks, putting the contract through support at 145.49, the Aug 17 low. A continuation lower and the clear break of this area confirm a resumption of the medium-term downtrend and pave the way for weakness towards 144.15, the Jan 13 low and major support. On the upside, clearance of 146.41, the Sep 4 high would instead highlight a base and a possible short-term reversal.
• Today the local calendar sees Industrial Production and Capacity Utilisation for August, along with BOJ Rinban Operations covering 1-10-year and 25-year+ JGBs.
• The cash JGB curve has slightly bull-flattened, with yields flat to 1.2bp lower. The benchmark 10-year yield is 0.5bp lower at 0.756%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814% set late last week.
• Swap rates are slightly mixed, with the 10-30-year zone outperforming. Swap spreads are generally wider.