JPY Swaps: Early 10y bid after domestic PPI data; US data eyed

Abstract data 9 Nov 2020
Domestic PPI data came in stronger than expected, backing some light paying in 10y JPY swaps in cautious trading.

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  • JGB future weaker after good PPI

  • Early 10y bid; SL offers emerge


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JGB future weaker after good PPI

JGB future has opened weaker today and was down by 26-ticks soon after market open. This was despite of dovish comments from incoming BOJ Governor Ueda and some weak inflation and PPI data from China on the previous day, and the rebound in USD rates market in overnight trading.


Dealers attributed the selloff in thin trading to slightly stronger-than-expected domestic data.


Official data released earlier today showed that PPI in March was up 7.2% year-on-year, down from 8.3% in February but slightly higher than economists’ estimation of 7.1%. On a month-on-month basis, it was unchanged from last month, compared to 0.3% of contraction in February. Core machine order was up 9.8% in February on an annual basis, beating consensus of 4.6% of growth and compared to 4.5% in January.


In mid-afternoon Tokyo trading JGB future was down 20-ticks at 147.6, and the yield on the benchmark 10-year JGB was a basis point higher at 0.563%.



Early 10y bid; SL offers emerge

The market has been cautious ahead of the US CPI data which will be released tonight Asia time. Indeed, there will be more key economic data this week including PPI, retail sales, as well as the FOMC minutes. Players therefore predicted very light trade flow this week.


A trader reported sporadic paying in 10-year before mid-day in a tight range around 4bps higher of 0.67% before being marked a basis point higher at 0.64% at time of writing. 30-year started off the day with paying at a tad higher of 1.105%, which was then replaced by slightly better offer at 1.5bps lower at 1.0825%.


10s/30s swaps flattened out by 1.75bps to 44.75bps.