JGBS: Cash Bonds Little Chnaged, PPI Below Estimates
In Tokyo morning trade, JGB futures are stronger, +9 compared to settlement levels.
- Japan's May PPI was below market expectations, falling 0.2% m/m (against a +0.2% forecast). April's rise was revised to +0.3% (from 0.2%). In y/y terms, we printed 3.2%, against a 3.5% forecast (prior was 4.1%). In terms of the detail, manufacturing PPI was down 0.4%m/m. Weakness was evident in commodities, particularly petroleum, coal (-4.8%m/m). Iron ore and steel were also down in m/m terms. Import prices for commodities were down 1.1%m/m, continuing a negative trend, now off 10.3% in y/y terms.
- There has been limited market reaction to the headlines coming from US-China trade talks, with the main takeaway being that the Geneva consensus was agreed to by both sides. The US side appeared confident that this would see rare earth flows increase from China to the US (leaders from both China and the US still have to agree to implement the outcome of the talks).
- Cash US tsys are slightly richer in today’s Asia-Pac session ahead of today’s CPI data.
- Cash JGBs are slightly mixed across benchmarks, with a mild steepening bias. The benchmark 10-year yield is 0.6bps lower at 1.472% versus the cycle high of 1.596%.
- Swap rates are flat to 1bp lower. Swap spreads are tighter.
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