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Overnight Gains Extended In Tokyo Dealings After Cash Earnings Miss

JGBS

In Tokyo morning trade, JGB futures have added to the overnight uptick, +16 compared to settlement levels, after labour and real cash earnings print weaker than expected.

  • Labour and Real Cash Earnings print +1.1% y/y and -2.5% y/y, respectively, versus estimates of +1.5% and -2.1% and priors +1.1% and -2.7%.
  • Bloomberg reports BOJ board members will likely discuss whether to tweak forward guidance along with the yield curve control mechanism when they gather later this month, according to a former executive director in charge of monetary policy. (See link)
  • Cash JGBs are dealing mixed, with the belly of the curve outperforming. Yields 2.0bps lower (7-year) to 1.2bp higher (30-year). The benchmark 10-year yield is 0.6bp lower at 0.806%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also below the cycle high of 0.814% set yesterday.
  • The swaps curve has twist-steepened, pivoting at the 20s, with rates within a range of -0.6bps to +1.1bps. Swap spreads are mixed.

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