7s Weak On Futures As Rest Of Curve Sees Light Richening

JGBs generally richened during the Tokyo morning, with the majority of the curve running little changed to 2bp richer, as a pull lower in crude oil prices and general downtick in equities provided support, with the front end of the curve outperfroming.

• The exception to that rule came in 7s, which cheapened by ~0.5bp, on catch up to the overnight weakness in futures. Note that JGB futures oscillated around late overnight levels during the Tokyo morning, never managing to fully retrace overnight losses, with the contract off of its Tokyo peak at the lunch bell, -12 on the day.
• In local headline flow, we saw the latest round of JPY-based rhetoric from the government reaffirm the central message i.e. no comment on specific JPY levels, while noting that sudden moves are not desirable.
• In terms of today’s BoJ Rinban operations we saw the following offer/cover ratios:
• 1- to 3- Year: 2.73x (prev. 2.00x)
• 5- to 10- Year: 1.80x (prev. 3.22x)
• 25+- Year: 4.91x (prev. 1.89x)
• Note that the jump in cover ratio observed in 25+-Year JGBs was a function of the BoJ operations reverting to “normal” size after last week’s impromptu purchases (the market offered to sell Y248.1bn of 25+-Year paper to the Bank to vs. the Y283.4bn seen in last week’s off-schedule operation).