Bear-Steepener At Lunch, 20Y Supply Due

At the Tokyo lunch break, JGB futures holding weaker, -11 compared to the settlement levels and close to Tokyo session lows ahead of today’s 20-year supply.

• Outside of the previously outlined PPI Services, there hasn't been much in the way of domestic drivers to flag. The local calendar will also see Leading & Coincident Indices and Machine Tool Orders data.
• Japan is closely watching the foreign exchange market and will respond appropriately to any excessive moves; the government’s top spokesman Yoshimasa Hayashi says in a regular press briefing (per BBG).
• Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s small gains.
• The cash JGB curve has bear-steepened, with yields flat to 2bps higher. The benchmark 10-year yield is 0.7bp higher at 1.003% versus the cycle high of 1.101%.
• The 20-year is 1.7bps higher at 1.848%, ahead of today’s supply. Today's auction comes on the heels of a strong 10-year JGB auction in June. The low price beat wider expectations, the tail shortened, and the cover ratio increased versus May’s auction. Like 10-year supply, June’s 30-year auction also displayed a more optimistic tone for a JGB market that had experienced mounting pressure since mid-December, fueled by expectations of policy tightening from the BoJ.
• Swaps are little changed out to the 30-year and 4bps higher beyond. Swap spreads are mixed.