Benchmark Futures Unwind Upswing Driven By Upsized Rinban Purchase Sizes

JGBs turned bid into the Tokyo lunch break as the BoJ increased purchase sizes in a scheduled round of Rinban operations, signalling its determination to defend its YCC framework ahead of a monetary policy review this Friday.

• The central bank boosted the sizes of its bond-purchase operations by Y100bn in the 10-25 Year basket & by Y50bn in the 25+ Year basket. Purchase sizes across the 3-5 Year & 5-10 Year baskets had already been revised higher versus the planned amounts last Friday. Today's operations drew the following offer/cover ratios:
  • 3-5 Year JGBs: 1.36x (prev. 1.89x)
  • 5-10 Year JGBs: 2.61x (prev. 3.00x)
  • 10-25 Year JGBs: 2.55x (prev. 1.58x)
  • 25+ Year JGBs: 2.28x (prev. 4.04x)
• 10-Year futures lost ground after the lunch break, erasing all earlier gains. JBZ2 last changes hands at 148.33, 33 ticks above previous settlement. The pullback in benchmark JGB futures coincided with a rebound in Japan's 10-Year swaps amid the ongoing debate on the sustainability of BoJ policy course.
• Cash JGB curve shifted lower and runs flatter, even as the earlier bull-flattening impetus moderated to a notable extent. The yield on 10-Year JGB targeted by the BoJ's YCC framework remained in the vicinity of the 0.25% cap.