[MARKET ANALYSIS] JGBs partially pare back earlier losses as USTs and Bunds await US CPI

The JGB market is reacting to broader dynamics as investors await key inflation data from the US, specifically the CPI report.

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[MARKET ANALYSIS] JGBs partially pare back earlier losses as USTs and Bunds await US CPI

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  • UST Futures trade muted, following on from the rangebound price action in Monday’s US cash session. This comes as markets wait for the December CPI report. Market expectations signal that headline inflation will hold at 2.7% while core inflation is expected to tick higher to 2.7% from 2.6%.
  • Bund Futures oscillate in a tight 5 tick range as newsflow remains light. Looking ahead, a 5-year Bobl auction and US CPI could bring in some volatility into the German debt space.
  • JGB Futures reopened and fell by as much as 71 ticks following the speculation that PM Takaichi may dissolve parliament and call an election, as recent polls show improved confidence in the PM. JGBs pared back at least half the move as the APAC session continued, with Japanese 10-year debt around 132.10.
Context

With UST and Bund futures exhibiting muted movement and JGBs recovering from initial losses linked to political speculation in Japan, this suggests a cautious sentiment in fixed income markets as traders assess inflationary pressures that could influence central bank policies. The upcoming US CPI figures are particularly significant, as they may set the tone for interest rate expectations across the board.

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