Futures Weaker, JGB Curve Twist Steepens, US PCE Deflator Due

JGB futures trading at a low note at 148.52, -12 compared to the settlement levels, after reaching a session cheap of 148.46 in the Tokyo afternoon session.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Tokyo CPI that missed on the annual rates for the headline, core, and core-core measures.
• Accordingly, JGB futures have traded in a relatively tight range, eyeing US tsys ahead of US PCE deflator data for May later today. The market consensus expects the headline deflator to show a monthly increase of +0.1%, indicating a slowdown in inflationary pressures. However, the Core PCE deflator, which is closely watched by the Fed, is anticipated to register a monthly increase of +0.3% following the +0.4% reading in April.
• Cash tsys sit little changed from Thursday closing levels across benchmarks in Asia-Pac trade.
• The cash JGBs curve has held its twist steepening in the Tokyo afternoon session, pivoting at the 7-year zone. Yield movements range from -0.8bp (5-year zone) to +1.6bp (40-year). The benchmark 10-year yield is 0.5bp higher at 0.396%.
• Swap rates are higher across the curve with the 40-year rate leading (1.8bp higher). Swap spreads are wider out to the 10-year and tighter beyond.
• The local calendar tomorrow sees the release of Tankan Survey and Jibun Bank PMI data on Monday.