Twisting Flatter As Tokyo Returns

JGB futures generally tracked the broader impetus in core global FI markets during the morning session as Tokyo participants found their feet after yesterday’s holiday. That was before a slowing of activity in the afternoon session, with liquidity diminished owing to the summer holiday period in Japan.

• That leaves the contract off of its session extremes as we work towards the weekend, -6 vs. Wednesday’s settlement. Wider cash JGB trade has seen the curve twist flatten with the major benchmarks running 1bp cheaper to 2bp richer, pivoting around 10s, after the long end more than reversed its modest, early losses.
• The only real domestic headline flow of note saw Japanese PM Kishida revealing that he plans to hold a meeting to discuss ways to curb inflation, with the gathering set to take place this Monday. Rising food prices and wages will seemingly form the focal points of those discussions.
• As we noted elsewhere, the latest round of Japanese weekly international security flow data revealed that last week saw foreign investors buy more than Y1tn of Japanese bonds in net terms for the fourth time in five weeks, with the latest round of purchases likely representing short covering of existing JGB positions, foreign investors looking to take advantage of FX-hedge-related yield pickups, or a mixture of the two.
• Looking ahead, preliminary Q2 GDP data headlines the domestic docket on Monday, with final industrial production data for June also due.