BoJ Ueda Reaffirms Dep Gov’s Message, 5Y Supply Due

At the Tokyo lunch break, JGB futures are holding near overnight closing levels, -15 compared to settlement levels, after of BoJ Governor Ueda’s appearance in Parliament.

• Financial conditions in Japan will remain easy for the time being even after the BoJ puts an end to the world’s last negative rate regime, Governor Kazuo Ueda said. “Even if we end minus rates, the accommodative financial conditions will likely continue” based on the bank’s economic outlook, Ueda said in response to questions in parliament Friday. (See BBG link)
• This comes after comments from BoJ Deputy Governor Shinichi Uchida yesterday sparked a burst of short covering.
• Cash JGBs are little changed, with yield movements bounded by +/- 1bp. The benchmark 10-year yield is 0.4bp higher at 0.709% versus the Nov-Dec rally low of 0.555%.
• The 5-year is unchanged at 0.312%, ahead of today’s supply. The current 5-year auction is taking place with an outright yield that is 10-15bps higher than January’s offering. It is also worth noting that January’s level was at its lowest since late July. The 2/5 curve is also around 5bps steeper than at the January auction.
• Today's auction also comes on the heels of solid results at February’s 10- and 30-year JGB supply.
• Swaps are slightly mixed. Swap spreads are also mixed.