Light Local Data Calendar, Cash Bonds Drifting With Cheapening US Tsys

At the Tokyo lunch break, JGB futures are holding stronger but off the best levels, +18 compared to the settlement levels.

• Today’s local calendar will see Industrial Production and Capacity Utilisation data later.
• (MNI) Bank of Japan officials are “rate-checking” against the euro in FX markets, meaning the BoJ stands ready to conduct forex interventions, the Nikkei reported. The BoJ is known for “rate-checking” before intervening, with the Ministry of Finance acting as final decision maker. Local media reported that Japanese authorities conducted yen-buying interventions against the U.S. dollar early on Friday.
• With the domestic data calendar so far empty, the local market has drifted lower in line with the ~2bp cheapening in cash US tsys in today’s Asia-Pac session. In the absence of news flow, this weakening in US tsys most likely reflects some profit-taking after yesterday’s solid rally.
• The US market’s focus is today’s June PPI and UofM Sentiment and the start of the latest equity earnings cycle: Wells Fargo, Bank of NY Mellon, JP Morgan and Citigroup headlining.
• The cash JGB curve has bull-flattened, with yields 1-2bps lower. The benchmark 10-year yield is 1.5bps lower at 1.075% versus the cycle high of 1.108%.
• Swap rates are flat to 1bp lower. Swap spreads are mostly wider.