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Bear-Steepening To End The Year, Market Closed Mon, Tue & Wed Next Week

JGBS

JGB futures are holding cheaper, -29 compared to settlement levels, after trading in a narrow range throughout the Tokyo session.

  • In the absence of domestic data catalysts, the local market has experienced a drift towards cheaper valuations, particularly driven by the long end. Nevertheless, the 20-40-year zone is currently positioned above the session's cheapest points. A slight improvement in US tsys during today's Asia-Pac session may have contributed to the rebound from the session's nadir levels.
  • Nevertheless, the cash JGB curve continues to hold a bear-steepening, with yields flat to 6bps higher. The benchmark 10-year yield is 2.3bps higher at 0.618% versus the recent rally low of 0.555% set on 20 Dec.
  • (Bloomberg) JGB futures have consistently produced a sell signal soon after rising above the 200-day moving average, and it looks set to run into next year as speculation rises over an exit from negative rates. (See link)
  • The swaps curve has also bear-steepened, with swap spreads wider to the 4-year and tighter beyond.
  • A reminder that Japanese markets are closed Monday, Tuesday, and Wednesday next week.
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