Mostly Cheaper, 1Y Supply Tomorrow, National CPI On Friday

JGB futures are weaker but sit in the middle of today’s range, -17 compared to the settlement levels, after reversing weakness seen in early rounds of the Tokyo afternoon session. Early afternoon weakness was consistent with the results of today’s BoJ Rinban operations, which saw flat to positive spreads and higher cover ratios for the longer-dated buckets.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Trade Balance data.
• Cash US tsys are dealing slightly richer in today’s Asia-Pac session after yesterday’s cheapening following Fed Chair Powell’s "lack of further progress on inflation" comment.
• Cash JGBs are mostly cheaper across the curve, with yields flat (5-year) to 1.6bps (40-year) higher. The benchmark 10-year yield is 1.2bp higher at 0.883%, after setting a fresh YTD high of 0.885% today.
• Given the recent global trend of inflation prints coming in hotter than expected, the stakes are likely higher for this Friday’s Japan National CPI release.
• The swaps curve has twist-steepened, with rates 2bps lower to 1bp higher. Swap spreads are tighter.
• Tomorrow, the local calendar sees weekly International Investment Flow, Tertiary Industry Index, Tokyo Condominiums for Sale and Machine Tool Orders data alongside 1-year supply. The MoF will also conduct an Enhanced-Liquidity Auction for 15.5-39-year OTR JGBS.