Richer But Overnight Gains Pared, 20-Year Supply Due

JGB futures are richer but pare overnight gains in the Tokyo morning session to be at 147.55, +14 compared to settlement levels. The Intraday high has been 147.68.

• According to MNI’s technicals team, JGB futures faltered Wednesday, cracking support at 147.34 to accelerate a brief move lower. Markets were content to buy on dips, helping move markets back toward flat ahead of the close. This mirrored the strength in US bond markets following the soft CPI, helping keep the upside impetus intact for now. Key resistance lies ahead at 149.21/53, highs from May and March. Clearance of these levels would highlight an important break.
• Japan's weekly investment flows showed offshore flows into local bonds were stronger at ¥705bn, which follows last week's ¥485bn in inflows. The flows to the end of July 7 were the strongest since mid-May. In terms of Japan's outbound flows, we saw -¥950.5bn in terms of foreign bonds. Typically, the data isn’t market-moving.
• Cash JGBs are mixed across the curve with the futures-linked 7-year zone the outperformer (0.9bp richer) and the 40-year zone the underperformer (1.4bp cheaper). The benchmark 10-year yield is flat at 0.474%, below the BoJ's YCC limit of 0.50%.
• The 20-year zone is 0.5bp cheaper, showing a small concession on the curve, ahead of supply today.
• The swaps curve twist steepens, pivoting at the 4-year. Swap spreads are mixed across the curve.