Super-Long End Richens While Futures Struggle

JGB futures have been subjected to contained two-way flow on Friday, with a lack of clear headline drivers apparent in Tokyo hours. The contract sits -6 into the bell, after recovering from worst levels. 7s provide the only cheaper point on the curve, owing to the weakness in futures, with yields there 0.5bp higher, while the super-long end outperforms as 40s richen by 4.5bp. Swaps rates are off session highs, with that curve now twist flattening, as super-long swap rates move in sympathy with the bid in the JGB equivalents. Swap spreads are flat to wider on the day.

• Yesterday’s report via Kyodo, pointing to expectations for incoming BoJ Governor Ueda to flag his plan to maintain current policy settings in an upcoming meeting with his predecessor, may have provided a light bid for futures at the Tokyo open (and most of the major cash JGB benchmarks during the day), before the contract came under pressure, perhaps on late NY dynamics in U.S. Tsys.
• Locally, wage data printed bang in line with expectations (nominal wage growth ticked higher in Y/Y terms and the rate of decline in Y/Y real cash earnings moderated a little, with the peak of headline inflation now seen as being in the rear-view), while household consumption data was notably softer than expected in Y/Y terms.
• Looking ahead, outgoing BoJ Governor Kuroda will speak after hours. Meanwhile, Monday will see BoP, consumer confidence and economy watchers survey data cross, as well as the latest round of BoJ Rinban operations.