JAPAN DATA: Local Investors Buy Offshore Bonds, Overseas Investors Buy Equities
Japan outbound flows last week saw local investors buy overseas bonds, ending a two week run of net selling for this segment. Cumulative outflows to overseas bonds remain strongly positive in recent months, but in recent weeks aggregate flows have been more modest compared to the first half of July. Local investors continued to sell overseas equities, albeit at a lower pace compared to the prior week.
- In terms of flows into Japan, we saw net buying from offshore investors for the first time in 4 weeks. Cumulative inflows into this space are only marginally positive going back to the start of May. JGB yields remain elevated, with the 10yr still eyeing a test above 1.60%. Fiscal concerns remain, with sentiment at longer dated JGB auctions still skittish.
- Offshore investors bought local stocks for the seventh straight week. The recent break higher in headline equity indices for Japan may be aiding momentum in this space.
Table 1: Japan Weekly Offshore Investment Flows
| Billion Yen | Week ending Aug 8 | Prior Week |
| Foreign Buying Japan Stocks | 489.3 | 193.9 |
| Foreign Buying Japan Bonds | 733.2 | -92.7 |
| Japan Buying Foreign Bonds | 254.9 | -527.0 |
| Japan Buying Foreign Stocks | -225.5 | -752.1 |
Source: Bloomberg Finance L.P./MNI
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ASIA STOCKS: Taiwan Inflows Buoyant Amid Tech Optimism, Outflows In India & SEA
Positive inflow momentum was a standout for Taiwan and South Korean markets yesterday. Sentiment around the AI/tech space was boosted by Nvidia resuming sales of a key chip to China (which was part of the broader US/China trade truce). Taiwan remains the best performer, with just under $1.8bn in net inflows in the past 5 trading days. Month to date, Taiwan has seen over $4.5bn in inflows. Tech equity bourses outperformed globally in Tuesday trade, although the firmer US yield backdrop (post the CPI outcome, which showed tariff effects emerging), has tempered sentiment in this space.
- Elsewhere, trends were mostly softer, with India unable to sustain a positive bounce from the end of last week.
- Recent positive momentum into Thailand cooled.
- Indonesian markets also continued to see outflow pressures, now at over $350mn in July to date. The overnight news of a 19% tariff deal with the US may help stabilize sentiment, at least on a relative value basis with tariff rates elsewhere in the region mostly higher.
Table 1: Asian Markets Net Equity Flows
| Yesterday | Past 5 Trading Days | 2025 To Date | |
| South Korea (USDmn) | 203 | 840 | -8137 |
| Taiwan (USDmn) | 710 | 1796 | -1395 |
| India (USDmn)* | -92 | -406 | -8420 |
| Indonesia (USDmn) | -20 | -108 | -3591 |
| Thailand (USDmn) | -18 | 97 | -2341 |
| Malaysia (USDmn) | -21 | -76 | -2813 |
| Philippines (USDmn) | -6 | -8 | -556 |
| Total (USDmn) | 756 | 2136 | -27254 |
| * Data Up To July 14 |
Source: Bloomberg Finance L.P./MNI
US TSYS: Cash Open
TYU5 is trading 110-08+, down 0-00+ from its close.
- The US 2-year yield opens around 3.945%, up 0.01 from its close.
- The US 10-year yield opens around 4.49%, up 0.1 from its close.
- (Bloomberg Economics) -- June’s CPI report showed clear signs of tariff pass-through, and Bloomberg Economics expects something similar in the month’s PPI print. Additionally, the PPI components that feed into the PCE deflator — due out July 31 — point to a much firmer reading for the Fed’s preferred inflation gauge.
- Fejau on X: “Core goods are meaningfully accelerating as of today's CPI print. Reason CPI came in within expectations was lagged core services (namely shelter) doing some heavy lifting and markets knew there's little juice left to squeeze from that. This is why the bond market sold off imo.”
- Nick Timiraos on X: “from @fcastofthemonth: "The big news in my view is that core goods prices excluding autos jumped by 0.55% in June, the largest monthly increase since November 2021."
- The 10-year yield has broken above 4.45% in response to the CPI Data, this implies price is likely to now turn its focus back to 4.65% and could see further paring back of longs. Support is now back towards the 4.35/40% area which has been the pivot in the larger 4.10% - 4.65% range.
- Data/Events: MBA Mortgage Applications, PPI, Industrial Production, Manufacturing Production
AUSSIE BONDS: AUCTION PREVIEW: ACGB Mar-36 Supply Due
The Australian Office of Financial Management (AOFM) will today sell A$800mn of the 4.25% 21 March 2036 bond. The line was last sold on 30 May 2025 for A$1200mn. The sale drew an average yield of 4.3306%, a high yield of 4.3325% and was covered 2.5792x. This new line was sold by syndication on 5 February 2025 for A$15.0bn.
- This week's ACGB supply is at the top end of the recent average weekly issuance of $1500-2000mn, with A$300mn of the 4.75% 21 June 2054 bond issued yesterday and A$1100mn of the 1.00% 21 November 2031 bond on Friday.
- During the first half of 2025-26, the AOFM plans to: issue a new October 2036 Treasury Bond (by syndication and subject to market conditions); conduct 2 Treasury Bond tenders most weeks; hold 1-2 Treasury Indexed Bond tenders each month.
- Issuance of Treasury Bonds (including Green Treasury Bonds) in 2025-26 is expected to be around $150 billion. Issuance of Treasury Indexed Bonds in 2025-26 is expected to be between $2 billion and $3 billion.
- Results are due at 0200 BST / 1100 AEST.
