At Overnight Highs At Lunch, Rinban Showed Mixed Results

JGB futures move back to the overnight high in the Tokyo morning session, +14 versus settlement levels. At 149.00, JBM3 is at its highest level since March 27 and withing striking distance of the March 22 high of 149.53. Technical analysis conducted by MNI indicates that surpassing the March 22 high would indicate a continuation of the upward trend.

• There hasn’t been much in the way of domestic drivers to flag with money supply data, as expected, not having much impact of the market. Accordingly, local participants appear to be on headline watch, with one eye on US tsys which are marginally richer in Asia-Pac trade.
• Cash JGBs are seeing gains across the curve, except for the 1-year zone, which is cheaper by 0.8bp. The yield curve has flattened, with yields down by 0.1 to 2.4 basis points. The benchmark 10-year yield has dropped by 1.3bp to 0.385%, well below the BoJ’s YCC limit of 0.50%. Meanwhile, the benchmark 30-year yield is down by 2.2 basis points to 1.211%, following a 5bp decline yesterday, which came after a strong auction result.
• Rinban operations saw slightly wider offer/cover ratios outside the 1-3-year bucket (1-3-year: 1.69x, 5-10-year: 2.16x, 10-25-year: 2.06 and 25-year+: 3.44), which may generate some mild pressure beyond the 1-3year bucket of the curve in early afternoon Tokyo trade. That said, spreads were lower across all buckets.
• Swap rates are lower across the curve with swap spreads wider except for the 1-year zone.