Back From Morning’s Bearish Extremes

Cash JGBs were little changed to 2.5bp cheaper across the curve this morning, with 5s failing to force a meaningful break above the 0% yield level, potentially limiting the broader weakness. Note that the proximity of 10-Year JGB yields to the upper end of the BoJ’s permitted -/=0.25% trading range may be a limiting factor (last dealing ~0.20%).

• Still, swap spreads sit wider across most of the curve, particularly in the longer end, which will be adding an extra source of weight on top of Thursday’s broader core global FI weakness.
• Futures have traded through technical support in the form of the Feb ’21 low (highlighted as a support point earlier), before paring back from extremes to hit the lunch break -24. An extension through the morning low would open the way towards the 61.8% retracement of the ’15-’20 rally (149.65).
• In local news, BoJ Governor Kuroda failed to introduce anything in the way of fresh topics at his latest address in front of parliament. Meanwhile, local reports (hitting in the last few minutes) have suggested that Japan could unveil relaxed border controls in the near-term, perhaps as soon as next week.