JPY Swaps: Data surprise backs light 10y flow; Flatter to the backend

• Data surprise drives JGB future higher

• Light 10y flow; Curve flatter to the backend

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Data surprise drives JGB future higher

JGB future was firmer today with a stronger upward momentum in the afternoon session, contrasting the selloff in the USD rates market on Friday.

The move was driven by a downside surprise in domestic data. Official data released earlier today showed that core machine order was down 3.5% year-on-year in March. This compared to 9.8% of growth in the previous month, and economists’ forecast of 1.3% of growth. On a month-on-month basis, it fell by 3.9%, after a 4.5% worth of contraction in February. The market had expected it to recover to 0.4% of growth.

JGB future was up by 25-ticks at 148.9 intraday before being marked 16-ticks higher at 148.81 in mid-afternoon Tokyo trading.

Light 10y flow; Curve flatter to the backend

Swappers have not been enthusiastic about entering new positions. Data flow both domestically and in the US is light this week and players prefer to be on the sidelines at least until the release of the FOMC minutes on Wednesday, and Tokyo inflation data on Friday.

A dealer reported receiving in 10-year at about 0.5bp lower of 0.56% before lunch break, but paying at 1.5bps higher in early-afternoon domestic trading.

The curve flattened out all the way to the backend. 2s/10s swaps flattened out by a basis point to 47.75bps while 10s/20s was 0.5bp flatter at 37bps.