Wider Impulse Set To Dominate

Early Tokyo trade should see JGB futures benefit from the previously alluded to bid in core global FI markets stemming from the latest comments from Chinese health officials, which focused on unswerving adherence to the country’s current zero COVID policy, although source reports pointing to back channel U.S.-Russia discussions aimed at preventing an escalation surrounding the war in Ukraine may be tempering the early risk-negative flows.

• JGB futures ultimately added 8 ticks in the final overnight session of last week, after recovering from their Tokyo base, remaining relatively insulated when it came to the rumours re: China loosening its COVID restrictions and the monthly U.S. NFP report.
• The super-long end of the JGB curve may be subjected to some pressure given the twist steepening observed in U.S. Tsys on Friday, although weekend news flow may limit the move there.
• Domestic headline flow observed since Friday’s Tokyo close has been dominated by continued headwinds for the Japanese government’s public approval ratings, although we don’t expect that to be much of a market mover.
• 10-Year JGBi supply dominates the domestic docket on Monday, which will leave the broader market impulse in the driving seat when it comes to price action.