Sharp Bull-Flattening Ahead Of 20Y Supply

In Tokyo morning trade, JGB futures are holding richer, +60 compared to settlement levels, and are at a Tokyo session high after today’s second-tier data drop.

• Japan's weekly investment flows saw offshore investors return to buying local bonds (+¥621.6bn), although this wasn't enough to offset last week's outflow. Since the start of Nov though, net inflows into this space have been positive. In terms of Japan's outbound flows, local investors were heavy net sellers of offshore bonds (-¥1080bn). This was the largest weekly outflow since Oct last year.
• Meanwhile, Core Machine Orders printed -2.2% y/y versus an estimate of -5.6%. Later on, the final IP for Oct is due.
• The other focus point will be an expected cabinet reshuffle announced today by PM Kishida, which follows the funding scandal engulfing parts of the ruling LDP. Note headlines crossed from Kyodo that Tokyo prosecutors would raid offices of the LDP (see BBG link).
• The cash JGB curve has bull-flattened beyond the 1-year, with yields 1.4bps to 7.0bps lower. The benchmark 10-year yield is 5.3bps lower at 0.641%. The 20-year is 6.7bps lower at 1.369%, showing no concession on the curve, ahead of today’s supply.
• Swaps curve has also bull-flattened, with swap spreads are mixed.