Bear-Steepener After BoJ Takata Comments, US PCE Deflator Due

JGB futures are holding weaker and close to session lows, -21 compared to settlement levels. The key driver of the move lower was comments from BoJ Board Member Takata. He sent a strong signal that the case for ending the negative interest rate policy is gaining momentum. (See link)

• JGB futures had earlier spiked higher after Industrial Production declined more than expected in January.
• The other domestic catalyst today was 2-year supply. The supply showed mixed demand metrics, as the low price failed to meet dealer expectations and the cover ratio declined. However, it is worth noting that today’s cover ratio was the second highest for a 2-year auction since July last year.
• Considering that today's auction took place with an outright yield at its highest level since 2011, the result highlights the impact that uncertainties surrounding the BoJ policy outlook are having on bond demand.
• Cash tsys are ~1bp richer in today's Asia-Pac session ahead of US PCE Deflator data later today.
• The cash JGB curve has bear-steepened, with yields 1-3bps higher. The benchmark 10-year yield is 1.7bps higher at 0.717%.
• The swaps curve has also bear-steepened, with rates 1-2bps higher. Swap spreads are little changed.
• Tomorrow, the local calendar sees Jobless Rate, Job-To-Applicant Ratio, Jibun Bank PMI Mfg and Consumer Confidence data.