Futures Stronger In Early Tokyo Trade, 10-Year Supply Due

JGB futures are dealing in positive territory in early Tokyo trade, +11 compared to settlement levels after Japan’s unemployment rate prints 2.5% versus 2.6% est. The labor force participation rate rose to 63.1% vs 62.9% in May. The job-to-applicant ratio was at 1.3 vs 1.31 in May. Also, Jibun Bank manufacturing PMI printed 49.6 in July versus 49.8 prior. This was the second consecutive month of contraction and the lowest reading since April.

• JGBs corrected lower on the back of the BoJ rate decision, slipping to new pullback lows of 146.79. Prices slipped again Monday, narrowing the gap with key support at the 146.11 low on the continuation contract - last printed back in February. According to MNI’s technicals team, the previous buy-on-dips theme appears to have paused, but any return higher will initially target the May 12 high of 149.21. Clearance of these levels would highlight an important break.
• Bloomberg reports that financial market reaction after the Bank of Japan’s surprise tweak to its yield curve control policy seems to be ruling out a flood of Japanese cash repatriating from global markets. (See link)
• Cash JGBs are mixed across the curve with yields +0.2bp (4-year) to -1.4bp (10-year). The benchmark 10-year yield is at 0.598%, above the BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%. Today the MoF plans to sell Y2.7tn of 10-year JGBs.
• Swap rates are trading mixed with swap spreads also mixed.