Wider Impetus Drags Futures Lower Overnight

JGB futures shed 20 ticks in overnight dealing, going out just off worst levels, with the wider core global FI space on the backfoot amidst elevated inflationary fears in Europe/the UK and as U.S. Tsys reacted to the latest round of U.S. data & Tsy supply, as well as setting up for Jackson Hole.

• Our technical analyst notes that JGB futures have traded lower, ending the recent consolidation. The trend remains bullish though and the pullback is likely a correction. The contract has recently pierced and closed above the 76.4% retracement of the 2022 downleg. This strengthens a bullish condition and sets the scene for a continuation higher towards levels not seen since March. Support to watch is at 148.80, the 22 Jul low. A break would threaten the bullish theme.
• There hasn’t been much in the way of meaningful domestic news flow to digest since yesterday’s Tokyo close.
• Looking ahead, services PPI data, the weekly international security flows and an address from BoJ’s Nakamura provide the domestic highlights today. There will also be a liquidity enhancement auction for off-the-run 15.5- to 39-Year JGBs.