10-Year JGB Yields Tumble Further Away From YCC Cap

Tokyo reacts to the precipitous falls in core global FI yields in early trade, with 10-Year yields now showing below 0.20%, the first such instance observed since August. The major cash JGB benchmarks are running 1-15bp richer as 10s lead the rally. Swap spreads are mixed, tightening between 2- to 5- and in the 30+-Year zone, while running wider in between. JGB futures tested their overnight high before backing off. Questions will begin to swirl re: the longevity of this move, given expectations for a further BoJ YCC tweak (we are now comfortably below the YCC cap that the BoJ defended until Dec), although if the SVB failure proves to be the straw that breaks the camel’s back when it comes to the global hiking cycle then market pressure on the BoJ could remain somewhat subdued, at least in comparable terms vs. what we have seen in recent months. If we see repricing re: global central banks reversing then expect fresh shorts to be set after what seems to be a bit of a position clear out in the latest rally.