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Futures Weaker As US Tsys Cheapen in NY Trade, Core CPI Misses


JGB futures traded lower in post-Tokyo trading, closing at -31 versus settlement levels. This decline came with US tsys pressured by optimistic sentiment regarding a resolution to the debt ceiling issue and hawkish comments from Fed's Logan.

  • The US Treasury's plan to bolster cash reserves through the issuance of approximately $1th in bills following the debt ceiling resolution.
  • According to MNI’s technical team, JGB futures corrected lower on Thursday, opening a solid gap with resistance at 149.17, the mid-week high. The strong recovery from 147.27, the Apr 18 low confirms the corrective nature of the recent pullback, keeping medium-term attention on 149.53, the March 22 high and the bull trigger.
  • Japan's 10yr OIS have moved back down towards the top end of the YCC ceiling, currently ~0.565% (mid-April highs were around 0.68%). 10yr government bond yields are back to 0.38%. At face value, neither rate is suggesting an imminent shift in BoJ's policy stance (or tweaks to YCC).
  • April CPI prints in line with expectations at +3.5% y/y, but core (ex-food and energy) undershoots at +4.1% versus expected +4.2%, prior +3.8%. Nonetheless, core CPI rises at its fastest annual pace since September 1981.
  • The MoF plans to sell Y6.3bn of 3-month bills as well as sell Y500bn of JGBs with 5-15.5 years until maturity in a liquidity enhancement auction.

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