BOJ: Rinban Purchase Offer

• Japan's core machinery orders, excluding those for power generation equipment and ships, rose 3.4% m/m in November, up from last 2.1% increase, posting the second monthly rise in four months.
• Orders from manufacturing sectors, increased 6.0%, decelerating from the previous 12.5% m/m reading.
• Orders from the non-manufacturing sector, rose 1.2% m/m, offsetting the 1.2% decrease registered last month.
• The outlook for the October-December period is for an increase of 5.7%, compared with the 1.3% decrease over the previous quarter.

• Tsys futures have opened lower in Asia, while there will be no cash tsys trading until Tuesday. Longer-dated contracts are underperforming this morning after curves bear-flattened on Friday. TU is the only contract not trading below Friday's lows, -00¾ at 102-22¾, while TY is -04+ at 108-13
• Projected rate cuts through mid-2025 cooling again, current lvls vs. Friday morning* as follows: Jan'25 at -0.1bp, Mar'25 at -6.9bp (-8bp), May'25 -12.6bp (-14.6bp), Jun'25 -21.6bp (-24.6bp), Jul'25 at -25.4bp (-29.1bp).

• Foreign holdings of tsys rebounded in November, rising by $51.6b to $8.63t, nearing the all-time high of $8.67t recorded in September. Gains were widespread, with China increasing its holdings by $8.5b to $768.6b, and the UK adding $22.3b to reach $765.6b. Meanwhile, Japan, the largest holder, saw a decline of $3.1b to $1.1t. Belgium's holdings rose by $11.7b to $361.3b, potentially reflecting custodial accounts for China. Conversely, the Cayman Islands, a hub for hedge funds, reduced holdings by $12.7b to $397b.

In Tokyo morning trade, JGB futures are slightly firmer, +2 compared to settlement levels.

• Japan Nov core machine orders data comfortably beat expectations. We were up 3.4% m/m, versus -0.8% forecast (prior was +2.1%). In y/y terms, we rose 10.3%, against a 4.2% forecast (prior as 5.6%).
• The +10%y/y print for core machine orders was back close to 2024 highs. Momentum recovered strongly through Q4 and was mostly ahead of market expectations. In terms of detail, the non-core items were quite volatile (which is typically the case). In y/y terms, manufacturing orders were 15.3% y/y, versus 7.6% prior. Non-manufacturing was 6.8% from 27.7% in Oct.
• This isn't a key watch point for the BoJ, with wages and inflation more in focus, but still will be welcomed ahead of Friday's policy outcome. It is a sign of a resilient economic backdrop.
• The cash US tsy market and stock exchanges are closed today for Martin L. King Day. Also noteworthy, the Federal Reserve entered their policy Blackout at midnight Friday through January 30.
• Cash JGBs are little changed across benchmarks. The benchmark 10-year yield is 0.6bps higher at 1.209% versus the cycle high of 1.262%.
• Swap rates are slightly lower. Swap spreads are slightly tighter.