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Belly Outperforms, Long Swaps Widen On BoJ Inaction

JGBS

JGB futures pushed higher during Tokyo trade as local participants reacted to the latest deepening of recessionary worries gripping the globe. The contract deals +31 ahead of the bell, with bulls failing to force a sustainable break above the 149.00 mark as of yet. Cash JGBs are little changed to ~2bp richer across the curve, although the long-end lagged the futures-driven bid observed in 7s, perhaps on the back of inaction when it came to the BoJ simply rolling over the current size and frequency of Rinban purchases into Q3 (note that the curve bull flattened yesterday as some participants speculated that the BoJ would up the size and/or frequency of purchases covering paper with more than 10 years until maturity, with longer end swap rates higher today as a result, driving a clear widening of long swap spreads).

  • Note that the latest BoJ Tankan survey’s sentiment readings were generally in line with exp. to a touch softer on net (the headline large manufacturers index was the most disappointing print, which may have added further support to JGBs), while CapEx plans at large firms provided a notable upside surprise.
  • Elsewhere, the uptick in Tokyo core CPI readings for June met expectations, while there was a modest uptick in the unemployment rate in May (which hit 2.6%).
  • Note that local headline flow may also be feeding into the wider bid, with Japan rumoured to have taken record tax receipts in FY21, while other reports pointed to Russian President Putin signing over the rights of the Sakhalin-2 oil & gas project to a Russian company (Japan’s Mitsubishi Corp. & Mitsui are partial owners of the original company/project).
  • Monday’s local docket is limited at best, with no major points of interest slated.
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JGB futures pushed higher during Tokyo trade as local participants reacted to the latest deepening of recessionary worries gripping the globe. The contract deals +31 ahead of the bell, with bulls failing to force a sustainable break above the 149.00 mark as of yet. Cash JGBs are little changed to ~2bp richer across the curve, although the long-end lagged the futures-driven bid observed in 7s, perhaps on the back of inaction when it came to the BoJ simply rolling over the current size and frequency of Rinban purchases into Q3 (note that the curve bull flattened yesterday as some participants speculated that the BoJ would up the size and/or frequency of purchases covering paper with more than 10 years until maturity, with longer end swap rates higher today as a result, driving a clear widening of long swap spreads).

  • Note that the latest BoJ Tankan survey’s sentiment readings were generally in line with exp. to a touch softer on net (the headline large manufacturers index was the most disappointing print, which may have added further support to JGBs), while CapEx plans at large firms provided a notable upside surprise.
  • Elsewhere, the uptick in Tokyo core CPI readings for June met expectations, while there was a modest uptick in the unemployment rate in May (which hit 2.6%).
  • Note that local headline flow may also be feeding into the wider bid, with Japan rumoured to have taken record tax receipts in FY21, while other reports pointed to Russian President Putin signing over the rights of the Sakhalin-2 oil & gas project to a Russian company (Japan’s Mitsubishi Corp. & Mitsui are partial owners of the original company/project).
  • Monday’s local docket is limited at best, with no major points of interest slated.