JGBS: Futures At Session Lows At Lunch, Curve Bear Steepens
At the Tokyo lunch break, JGB futures are currently trading at session lows, -35 compared to the settlement levels. This decline comes as local participants absorb stronger-than-expected domestic data and higher global yields influenced by robust US employment-related data.
- There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined better than expected May nominal and real labour cash earnings data. This is a key input in terms of Japan reaching its 2% inflation target in a sustainable fashion. Later today sees leading and coincident indices data, but it is unlikely to be a market mover.
- The cash JGBs curve, beyond the 1-year zone, has bear steepened in the Tokyo morning session with yields 1.1-3.0bp higher, with the futures linked 7-year zone as the underperformer. The benchmark 10-year yield is 2.2bp higher at 0.436%, still below the BoJ's YCC limit of 0.50%, but at its highest level since mid-June. The 30-year zone sees its yield only 1.4bp higher after yesterday’s auction revealed lower-than-expected demand.
- Swap rates are higher with the curve steeper. Swap spreads are tighter across the curve.
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JGBS: Futures Holding An Uptick, BoJ Gov. Ueda Due In Parliament
At the Tokyo lunch break, JGB futures are holding close to the overnight session’s closing level, +5 compared to settlement levels, after trading in a narrow range in Tokyo morning trade.
- The local data calendar has the April preliminary leading and coincident indices released later today (0600 BST). The market consensus for the leading index is 98.2 (prior 97.7), for the coincident index it is 99 versus 98.8 prior. These releases are unlikely to move market sentiment.
- With the local calendar light, local participants are likely on headlines watch and monitoring US tsys after the US cash curve twist flattened on Tuesday. The cash tsy curve has twist flattened further in Asia-Pac trade with yields +2.3bp to -0.2bp, pivoting at the 20s.
- BoJ Governor Ueda is scheduled to appear in parliament from 0530 BST / 1330 JST.
- The cash JGB curve twist flattened in morning Tokyo trade, pivoting at the 4-year zone. The benchmark 10-year yield is 0.3bp lower at 0.423%.
- Swaps curve twist flattens as well with swap spreads wider out to the 7-year zone and generally narrower beyond.
US TSYS: Curve Marginally Flatter
Tsys were unable to hold gains seen alongside the Yen firming and pressure on Japanese equities. Little meaningful macro news flow has crossed in recent dealing, and tsys have ticked away from best levels. Cash tsys sit 1bp cheaper to 0.5bps richer across the major benchmarks, the curve has twist flattened pivoting on 20s. TYU3 deals at 114-00, +0-07, with a 0-04 range observed.
- A thin data calendar for the remainder of the Asian sessions leave participants on headline watch.
NZD: Marginally Pressured, Ranges Narrow In Asia
NZD/USD prints at $0.6070/75, the pair is ~0.1% lower than opening levels.
- The pair has been marginally pressured in recent dealing, mild risk off flows have seen the Yen and USD advance whilst US Equity futures have retreated from session highs.
- NZD/USD met resistance ahead of $0.6090, however ranges do remain narrow as moves have had little follow through thus far.
- AUD/NZD sits little changed, the pair is consolidating below $1.10.
- Cross asset wise; e-minis are flat having been marginally firmer in early dealing. BBDXY is also little changed.
- Looking ahead on the wires tomorrow we have Q1 Manufacturing Activity, there is no estimate and the prior read was -0.4%Q/Q.
