40-Year Supply Due At Testing Time

JGB futures shed 10 ticks in overnight trade, with the wider, Gilt-driven weakness in core global FI markets applying pressure.

• Still, the contract finished off worst levels, with participants perhaps unwilling to push things too much further, at least for now, given the BoJ’s insistence that it will defend its YCC settings.
• We will see how Tokyo reacts to the overnight moves, with U.S. Tsy futures holding just above Monday lows and Aussie bonds on the defensive during early Asia-Pac dealing.
• Note that domestic headline flow that has crossed since yesterday’s Tokyo close has been dominated by a Nikkei piece which flagged estimates that Japan’s intervention in the currency market on Thursday of last week saw ~Y3tn deployed, which would make it the largest single day of Japanese FX intervention on record, per the report.
• 40-Year JGB supply headlines the domestic docket on Tuesday, with services PPI and machine tool orders data slated.
• Participants will also be on the lookout for potential unscheduled BoJ action given the proximity of 10-Year JGB yields to the upper limit of the Bank’s YCC tolerance band in the wake of the moves witnessed in wider FI markets on Monday.