Slightly Cheaper Ahead Of 40Y Supply

In Tokyo morning trade, JGB futures are weaker but off session lows, -6 compared to settlement levels.

• Preliminary Jibun Bank PMIs printed for July: Mfg falls to 49.2 from 50 in June; Services rises to 53.9 from 49.4 in June; and Composite rises to 52.6 from 49.7 in June.
• Today, the local calendar will also see 40-year supply.
• (Bloomberg) Yen interest rate futures have room to decline as December contracts are pricing for only one more Bank of Japan rate hike this year, which understates the risks to the Japanese currency which lie ahead later this year. Indeed, a survey of economists expects a modest rate increase in the window between July and October, with almost nothing forecast for December. (see link)
• Cash JGBs are slightly cheaper, with yields flat to 1bp higher. The benchmark 10-year yield is 0.8bp higher at 1.073% versus the cycle high of 1.108%.
• Swap rates are little changed out to the 30-year, and 4bps higher beyond. Swap spreads are mixed.