JGBS: Twist-Steepener, Q1 GDP Beats
At the Tokyo lunch break, JGB futures are stronger, +22 compared to the settlement levels, but hovering near session cheaps.
- Japan Q1 GDP contracted slightly more than market forecasts. Q/Q growth was -0.2% (-0.1% forecast and 0.6% prior), while in annualized terms we fell -0.7%, against a -0.3% forecast but Q4 revisions were higher to +2.4%. This is the first GDP q/q growth contraction since Q1 2024. It comes ahead of likely trade disruptions from US tariffs, while trade negotiations continue. The softer aggregate growth backdrop underscores recent downward revisions to the BoJ growth forecasts, which suggests little prospect of further policy rate hikes in the near term.
- Private consumption spending was flat, against a 0.1%q/q forecast. Q4's outcome was revised up to a 0.1% gain (originally reported as a flat outcome).
Business spending was a bright spot, up 1.4%q/q, versus 0.6% forecast, while Q4 was revised higher to +0.8%. - For the BoJ/authorities, the rise in business spending will be encouraging but the flat consumption result will be a watch point. The policy aims remains for better spending outcomes boosted by positive real wages.
- Cash JGBs have twist-steepened, pivoting at the 20-year, with yields 1bp lower to 2bps higher.
- In contrast, the swaps curve has twist-flattened with rates 2bps higher to 2bps lower.
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CHINA: On Balance Better Data, But Limited Market Reaction
On balance beats from the China data, most notably from IP (+7.7%y/y) and retail sales (+5.9%y/y) for March. Q1 GDP y/y better at 5.4% but q/q slightly below (1.2%, versus 1.4% forecast). Property investment still weak, while jobless rate edges down to 5.2%, prior was 5.4%. More details to follow.
Market reaction mixed, but not large. USD/CNH down a touch, but no follow through, last near 7.3250. AUD/USD up a touch to 0.6355/60. Rest of the USD is weaker though versus the G10, so this may also be a factor.
Hong Kong equities still down comfortably for the session, HSI last off 1.8%.
MNI: CHINA MAR INDUSTRIAL OUTPUT +7.7% Y/Y VS MEDIAN +5.8% Y/Y: NBS
- CHINA MAR INDUSTRIAL OUTPUT +7.7% Y/Y VS MEDIAN +5.8% Y/Y: NBS
- CHINA MAR RETAIL SALES +5.9% Y/Y VS MEDIAN +4.2% Y/Y
- CHINA Q1 FIXED-ASSET INVESTMENT +4.2% Y/Y VS MEDIAN +4.1% Y/Y
- CHINA Q1 PROPERTY INVESTMENT -9.9% Y/Y VS MEDIAN -9.7% Y/Y
- CHINA MAR UNEMPLOYMENT RATE +5.2% VS FEB +5.4%
- CHINA Q1 INDUSTRIAL OUTPUT +6.5% Y/Y VS JAN-FEB +5.9% Y/Y
- CHINA Q1 RETAIL SALES +4.6% Y/Y VS JAN-FEB +4.0% Y/Y
- CHINA Q1 2025 REAL GDP +5.4% Y/Y VS MEDIAN +5.2% Y/Y: NBS
- CHINA Q1 2025 REAL GDP +1.2% Q/Q VS MEDIAN +1.4% Q/Q
CHINA PRESS: China To Increase Consumption Boosting Efforts - Premier Li
China should promote consumption, expand domestic demand, and strengthen domestic circulation with greater effort, calmly responding to the difficulties and challenges brought about by external shocks, said Premier Li Qiang. Authorities must make full use of policies to cope with the adverse impact on foreign trade by coordinating domestic and international standards and building a platform for high-quality foreign trade products to expand domestic sales, said Li. (Source: China Securities Journal)
