Futures Struggle In Early Tokyo Trade

With some questions coming in on the move in JGB futures we would flag that there hasn't been much in the way of idiosyncratic fundamental news flow to explain the pullback from overnight highs, with the initial overnight correction coming as U.S. Tsys moved back from Thursday's pre-NY richest levels. The contract last trades -21 vs. yesterday's settlement levels, which is 46 ticks off of the overnight peak. This comes after the contract finished overnight trade just a handful of ticks above Tokyo settlement.

• We have previously identified speculation surrounding CTA-like participation in the most recent legs higher in futures (which broke technical resistance levels), which can exacerbate momentum when the trend falters a little.
• Cash JGB trade sees much of the movement limited to the 7-Year zone, pointing to futures driven moves, as opposed to outright cash JGBs being in the driving seat. 7-Year yields print 2.0bp higher on the day at typing.
• 10-Year JGB yields do not seem willing to test the 0% mark without a fresh fundamental catalyst, this comes after the metric hit a low of 0.02% on Thursday, a level not printed since early January.
• Weakness in local equity markets may be helping limit the fall in JGBs, with the Nikkei 225 currently the best part of 2% softer on the day.