Bear-Steepening Of JGB Curve Extends After BOJ Rinban Operations, Holiday Tomorrow

In the Tokyo afternoon session, JGB futures are weaker at 146.04, -26 compared to settlement levels, after reaching a new session low of 145.95 in early afternoon dealings. With the domestic data calendar light today, the catalyst for afternoon weakness appeared to be the results of this morning’s BOJ Rinban operations. The operations showed positive spreads and higher cover ratios (1-3-year: 2.57x, 3-5-year: 3.00x, 5-10-year: 1.86x and 25-year+: 2.39x).

• Reuters poll: 85% of economists say BOJ will end negative interest rates in 2024, up from 63% in the October poll.
• Weakness in cash US tsys, 2-3bps cheaper across benchmarks, in today’s Asia-Pac session also weighed on JGBs. That said, US tsy dealings have been relatively subdued as the market approaches the Thanksgiving holiday.
• The cash JGB curve has bear-steepened. The benchmark 10-year yield is 2.2bp higher at 0.725% versus the cycle high of 0.97% set in late October and the BOJ's 1% YCC reference rate. The 20-year yield is 4.8bps higher at 1.454%, fully reversing yesterday's post-20Y auction rally.
• The swaps curve has bear-steepened too, with rates 0.4bp to 5.9bps higher. Swap spreads are wider.
• A reminder that the local market is closed tomorrow for the Labour Thanksgiving holiday. National CPI is due for release on Friday.