JGBS: Cash Bonds Cheaper After Yesterday’s Holiday, CPI Beats
In Tokyo morning trade, JGB futures are weaker, -14 compared to settlement levels, as trading resumed after yesterday’s holiday.
- National CPI for February was slightly above market expectations. Headline CPI printed at 3.7%y/y (forecast was 3.5%, prior in Jan 4.0%), the ex fresh-food measure was 3.0%y/y against a 2.9% forecast and 3.2% prior. The ex-fresh food and energy measure printed 2.6%y/y, in line with market forecasts but up from the 2.5% Jan outcome.
- Offshore investors bought close to ¥3.4trln of Japanese bonds last week though. Again, this fits in with a more market risk-averse theme, with JGBs and the yen seen as traditional safe havens. Last week's net buying of bonds was the largest since March 2023.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest gains. It was a relatively subdued session with the markets continuing to digest the FOMC's stance.
- Cash JGBs are 1-3bps cheaper across benchmarks, with the futures-linked 7-year leading. The benchmark 10-year yield is 2.1bps higher at 1.536% versus the cycle high of 1.58%.
- Swap rates are 1-2bps higher. Swap spreads are mixed.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
JAPAN DATA: Core Machine Orders Weaker Than Forecast
Other Japan data released showed core machine orders for Dec weaker than forecast. We fell 1.2% m/m, against a 0.5% forecast and 3.4% prior. In y/y terms we printed 4.3% (against a 7.5% forecast and 10.3% prior).
- We saw weakness for both manufacturing and non-manufacturing orders. Manufacturing was still positive y/y, albeit just.
- The chart below overlays core machine orders against Japan Capex (ex software spend). The softer machine order read is hinting at a slightly weaker capex backdrop, but arguably we need to see a firmer downtrend in machine orders to be more confident in such a call.
- Note we get Q4 capex data on March 4.
Fig 1: Japan Core Machine Order & Capex (Ex Software) Y/Y
Source: MNI - Market News/Bloomberg
STIR: RBNZ Dated OIS Pricing Slightly Softer Ahead Of RBNZ Decision
RBNZ dated OIS pricing is slightly softer across meetings today, ahead of the RBNZ Policy Decision.
- The RBNZ decision is widely expected to cut rates 50bp again to 3.75%. Revised staff forecasts will also be published with the decision at 1200 AEDT/1400 NZDT and Governor Orr’s press conference taking place at 1300 AEDT/1500 NZDT.
- All 22 analysts surveyed by Bloomberg forecast a 50bp rate cut, and the RBNZ shadow board recommends 50bp of easing.
- Notably, OIS pricing is 2–15bps firmer than pre-Q4 Labour Market data levels from February 4.
- Nevertheless, 49bps of easing is priced for today, with a cumulative 115bps by November 2025.
Figure 1: RBNZ Dated OIS Today vs. Yesterday (%)
Source: MNI – Market News / Bloomberg
AUSSIE BONDS: ACGB Jun-35 Auction Shows More Demand
Today’s auction showed strong pricing for ACGBs, with the weighted average yield coming in 0.63bps below prevailing mid-yields, according to Yieldbroker. Additionally, the cover ratio rose to 4.1437x from an already robust 4.000x at the previous auction.
- As noted in our preview, the current yield was approximately 10bps higher than at the prior auction, likely contributing to the robust demand. Improved sentiment toward longer-dated global bonds over recent weeks, along with a steeper 3s/10s yield curve, also likely supported the auction’s success.
- Post-auction, both the cash line and XM are slightly cheaper.
