Overnight Gains In Futures Ahead Of Weekend Continue to Be Pared At Lunch

At the Tokyo lunch break, JGB futures remain richer, +7 compared to the settlement levels, but have continued to pare overnight gains seen before the weekend.

• There hasn’t been much in the way of domestic drivers to flag. Today the local calendar sees Industrial Production and Capacity Utilisation for August later, along with results of today’s BOJ Rinban Operations covering 1-10-year and 25-year+ JGBs.
• Accordingly, local investors have likely eyed US tsys in today’s Asia-Pac session for guidance. US tsys are holding cheaper, but ranges have been narrow in recent dealing. Little meaningful macro news flow has crossed. This leaves cash US tsys 2-5bps cheaper, with a light bear steepening remaining apparent. TYZ3 deals at 107-16+, -0-06+, a 0-08+ range is persisting.
• Cash JGBs are slightly mixed, with the range of yield movements bounded by +/- 1.0bp. The benchmark 10-year yield is 0.3bp lower at 0.758%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814%.
• Swap rates have bear-steepened, with 0.1bp to 1.0bp higher. Swap spreads are generally wider out to the 30-year.