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JGBS: Positive Spill Over From US Tsys, But Don't Break Weekly Highs

JGBS

JGB futures sit just off session highs in latest dealings. JBZ4 is at 144.71, +.17 versus settlement levels. Pre the lunch time break we got as high as 144.79. 

  • Positive bias has been evident from the move up in US Tsy futures. Ex NY Fed head Bill Dudley was speaking at a forum in Singapore and stated there is a strong case for the Fed to cut 50bps at the September policy meeting.  
  • For JGB futures, focus is likely to be on whether we can break above recent highs around 144.80. The technical backdrop is supportive of such a move.
  • Cash JGB yields are weaker, led by the backend of the curve. The 10yr is off over 2bps and sub 0.845%, not too from its simple 200-day MA in yield terms. The 20yr has seen the largest drop in yield, off 4bps. Swap rates are off around 2bps for key parts of the curve.
  • The 3 month debt sale saw a debt to cover ratio of 3.13x, with an average yield just under 0.06%.
  • Looking ahead to next week, the main focus will rest on BoJ's Friday policy announcement (before this we have National CPI). No change is expected from the economic consensus.
  • On the supply front we have a 1yr debt sale next Wednesday. 
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