Bear-Flattening, Light Calendar, BOJ Riban Operations Due

In Tokyo morning trade, JGB futures are holding the uptick from overnight dealings on Friday, +3 compared to settlement levels.

• Today, the local calendar is empty, ahead of the BoJ policy decision tomorrow. While certain investors interpreted recent statements from BoJ officials regarding exit scenarios as a sign of an imminent shift away from yield curve control, we are inclined to view it as a strategic step in the extended process of preparing for a seamless transition, likely occurring around mid-year next year.
• The BoJ will conduct Rinban operations covering 1- to 25-year JGBs today.
• Bloomberg reports that the survival of negative-yielding debt is a reminder that investors need to be cautious when anticipating bold moves from the BoJ. (See link)
• Narrow ranges are persisting in early trade on Monday for cash US tsys. The early move lower has not yet followed through, with little meaningful macro newsflow crossing. This leaves cash tsys flat to 2bps cheaper, with a light steepening apparent.
• The cash JGB curve has bear-flattened, with yields 2.6bps to 0.8bps higher. The benchmark 10-year yield is 1.6bps higher at 0.712% versus the recent rally low of 0.622%.
• The swaps curve has bear-steepened, with swap spreads tighter out to the 10-year and wider beyond.