Little Reaction To Q2 GDP Beat, BoJ Rinban Operations Due

JGB futures are weaker in Tokyo morning trade, -7 compared to settlement levels, after today’s domestic data drop.

• Japan's Q2 GDP was better than forecast. In q/q terms, it rose 0.8%, which was the strongest rise since Q1 in 2023. It ends a soft run of growth outcomes seen since Q3 last year (-1.0%q/q, Q4 +0.1%q/q and Q1 this year, -0.60% q/q). GDP rose 3.1% q/q annually, versus a 2.3% forecast.
• This supports the recent BoJ decision to hike rates and taper its bond-buying program. Focus in H2 will be on consumption, with the authorities hopeful rising wages will aid further gains and that this will boost broader economic activity.
• Today, the local calendar will also see June Capacity Utilisation and Industrial Production data alongside BoJ Rinban Operations covering 1-3-year and 5-25-year+ JGBs.
• Cash US tsys are little changed in today’s Asia-Pac session.
• Cash JGBs are little changed, with yield swings bounded by +/- 0.5bp. The benchmark 10-year yield is unchanged at 0.822% versus the cycle high of 1.108%.
• Swaps and swap spreads are also little changed.