Futures Stronger At Lunch

At the Tokyo lunch break, JGB futures are stronger, +9 compared to the settlement levels, having more than reversed overnight weakness induced by US tsys.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined National CPI, which printed in line with expectations at the headline level but slightly above expectations for core and core-core measures.
• JGB futures sold off further into the Thursday close, putting the contract further through support at 145.49, the Aug 17 low, according to MNI’s technicals team. A continuation lower and the clear break of this area has confirmed a resumption of the medium-term downtrend and paves 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.
• Cash JGBs are little changed out to the 4-year, with a twist-steepening of the curve beyond. The 5-year yield is 1.0bp lower at 0.363% after BOJ said it would offer 5-year loans to banks on Tuesday (See link ICYMI). The benchmark 10-year yield is 0.4bp higher at 0.844%, slightly below the cycle high of 0.851% set yesterday.
• The swaps curve is richer, with the belly outperforming. Swap spreads are generally tighter.