Bear Steepening Extends Through Afternoon Post-Rinban

JGB futures held lower on Monday, looking through a modest uptick in U.S. Tsys linked to UK fiscal matters., last -14, respecting the base of their overnight session range thus far.

• Cash JGBs run flat to 6bp cheaper across the curve, bear steepening. 10s are limited by their proximity to the upper end of the range permitted by the BoJ’s YCC settings and 7s sold off more than surrounding lines on the weakness in futures.
• A steady to slightly higher round of cover ratios in today’s BoJ Rinban operations has added the steepening, particularly given the recent upsizing of the super-long end purchases from the Bank (i.e. more super-long sellers were seen this time out in nominal terms).
• The idea of higher business tax rates was flagged by the ruling LDP Party tax chief over the weekend, but that did little to support the space.
• BoJ Governor Kuroda reiterated his previous musings re: the need for continued monetary easing, while Finance Minister Suzuki and top FX diplomate Kanda reiterated their own recent rhetoric re: FX matters.
• Japanese PM Kishida once again pointed to the need for continued government-BoJ cooperation, which will factor into his choice for Kuroda’s successor.
• 20-Year JGB supply headlines domestic matters on Tuesday.