Bull Flattening, But Maybe In For Fresh Pressure In The Afternoon

JGB futures initially nudged higher at the Tokyo re-open, with a wider defensive feel and spill over from core FI moves during NY hours feeding into the bid. Subsequent stabilisation in wider risk appetite helped the space away from best levels, while a fresh move lower for U.S. Tsys during the Tokyo lunch break may apply further pressure at the afternoon re-open. Note that the contract hit the lunch bell +8 vs. settlement levels. Cash JGBs run little changed to 1.5bp richer across the curve, with Wednesday’s flattening impetus on the U.S. Tsy curve spilling over.

• Note that the latest round of BoJ Rinban operations resulted in the following offer/cover ratios:
• 1- to 3-Year: 2.07x (prev. 2.55x)
• 5- to 10-Year: 2.96x (prev. 3.25x)
• 25+-Year: 5.00x (prev. 5.20x)
• The downticks in cover may provide modest support for the respective sectors during early afternoon trade, although we would expect wider risk sentiment to overpower that dynamic.