JAPAN DATA: Local Investors Buy Offshore Bonds For First Time Since End Feb
Offshore inflows into Japan markets remained positive in the week ending the 18th of April. For the third straight week we saw foreign buying of local stocks. This continues the turnaround after strong selling dominated this segment from the start of the year. Offshore investors also purchased local bonds for the third straight week as well, albeit at a more modest pace compared to the prior weeks.
- In terms of outbound Japan flows, we saw local investors resume purchases of offshore bonds, the first such outflows since late Feb. The amount was modest and only partially reverses recent outflows. Such trends will be watched though, given the recent volatility of US Tsys amid concerns the market is losing its status as a bellwether safe haven market.
- On the equity side, local investors continued to buy offshore stocks, marking the fifth straight week of outflows to this segment.
Table 1: Japan Weekly Offshore Investment Flows
| Billion Yen | Week ending April 18 | Prior Week |
| Foreign Buying Japan Stocks | 705.6 | 1044.9 |
| Foreign Buying Japan Bonds | 1000.7 | 2310.7 |
| Japan Buying Foreign Bonds | 223.7 | -511.9 |
| Japan Buying Foreign Stocks | 610.4 | 235.8 |
Source: MNI - Market News/Bloomberg
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JGBS: Futures Weaker & At Lows After BoJ Minutes (Jan)
In Tokyo morning trade, JGB futures are weaker and session lows, -23 compared to settlement levels.
- The BoJ released minutes from its January policy meeting, highlighting growing confidence in its economic outlook. Members discussed the risk of price expectations exceeding 2% and one suggested a 1% interest rate as desirable in the second half of FY2025. They noted market stability after Trump took office and anticipated that a rate hike would not cause major disruptions. Concerns were raised about US inflation and trade frictions, while rent increases were identified as crucial for underlying inflation.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s heavy session.
- Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 10-year yield is 1.9bps higher at 1.564% versus the cycle high of 1.584%.
- Swap rates are flat to 2bps higher. Swap spreads are mixed.
LNG: Gas Little Changed, Europe To Restrict Russian LNG Vessels
European natural gas prices fell 0.9% to EUR 42.22 to be down almost 5% this month as the market watches ongoing talks with the US for a Ukraine peace deal in Saudi Arabia. Hopes remain that sanctions on Russia will be eased before next winter. Another period of cold weather in Europe is expected in early April, which could increase heating demand and impact already depleted inventories.
- Morgan Stanley estimated that Europe has bought around 35% of global LNG in 2025 to date, 10pp higher than 2024. Erste Group believes that it will need an additional 250 LNG shipments this year to refill storage assuming pipeline flows from Russia don’t resume. Last summer Europe had to compete with Asia for supplies as the latter faced a heatwave and sharply higher cooling demand.
- Europe will ban Russian LNG tankers stopping in its ports from March 27, which could disrupt shipments headed for Asia.
- Prices for summer contracts remain above the April and November/December contracts but the spread has narrowed significantly and they are now under EUR 43.
- US gas fell almost 2% on Monday to $3.91 on expectations of less heating demand as spring progresses. But weather forecasts have shifted cooler, especially for the northeastern US, at the end of March/early April, according to Atmospheric G2.
- Power has been disrupted to Texas’ Freeport LNG facility following a lightning strike.
- Bloomberg notes that LNG imports into China are down 20% y/y due to soft demand and more piped gas. This is allowing more shipments to go to Europe.
JGB TECHS: (M5) Within Range of Fresh Cycle Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 137.72 @ 16:12 GMT Mar 21
- SUP 1: 136.67 - 1.0% 10-dma envelope
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have traded lower breaching recent key support at 138.71, the Feb 21 low. This confirms a resumption of the bear leg and note too that MA studies are in a bear-mode set-up, highlighting a downtrend. Sights are on 136.57, a Fibonacci projection. For bulls, a show through 140.33 resistance would signal a possible reversal, and open early December highs should the pace be maintained. 144.48 is the medium-term target on any recovery.
