JGBS: Twist-Flattening Ahead of US CPI Data

JGB futures are weaker but off lows, -9 compared to the settlement levels.

• Cash US tsys are little changed in today's Asia-Pac session ahead of today's US CPI data.
• (MNI) The CPI report for July is released on Tuesday Aug 12, at 0830ET. Consensus sees core CPI inflation at a seasonally adjusted 0.3% M/M in June and unrounded analyst estimates broadly echo this with a median 0.32% M/M. It would mark a further acceleration from 0.23% M/M in June and 0.13% M/M in May for its fastest pace since January, with the latest firming seen coming from core goods inflation doubling to 0.4% M/M.
• (Bloomberg) -- Bond investors betting on a Federal Reserve interest rate cut next month face a potential roadblock: inflation. July's consumer price index, due on Tuesday, will give traders clues on how President Donald Trump's tariffs are affecting costs. Economists surveyed by Bloomberg expect the annual core inflation rate to rise to 3%, the highest since February.
• Cash JGBs are showing a modest sell-off across benchmarks, led by the 30-year. The benchmark 10-year yield is 0.9bp higher at 1.499% versus the cycle high of 1.616%.
• Swap rates are flat to 1bp higher, with a steepening bias.
• Tomorrow, the local calendar will see PPI and Machine Orders data alongside 5-year supply.

RBA-dated OIS pricing is flat to 2bps softer across meetings after the decision, with mid-2026 leading. 

• A 25bp rate cut in August was given a 97% probability.
• A cumulative 36bps of easing priced by year-end. 

Figure 1: RBA-Dated OIS – Current Vs. Pre-RBA

Source: Bloomberg Finance LP / MNI