Bull Flattening Dominates

The JGB curve has continued to flatten during the Tokyo afternoon, with a move away from session cheaps in U.S. Tsys and smooth enough digestion of the latest round of 20-Year JGB supply (crucially, the low price met wider dealer expectations, even with the remainder of the internal metrics presenting a more mixed picture) aiding the bid, after U.S. Tsy trade on Wednesday provided some early direction. The major JGB benchmarks are little changed to ~7bp richer across the curve, while JGB futures are +15 ahead of the bell, regaining some poise after initially ticking away from overnight highs.

• We have suggested that recent sessions have seen super-long demand from the domestic pension fund and life insurer cohort, given the lack of attractive offshore bond propositions noted at present (owing to elevated FX-hedging costs and ongoing market vol.).
• BoJ speak offered little tangible information for markets to trade off of, while Japanese Finance Minister Suzuki also went over old ground.
• Elsewhere, the latest BBG survey surrounding the BoJ questioned the analytical community on potential successors to BoJ Governor Kuroda when his current term ends in April ’23. It was no surprise to see BoJ veterans Masayoshi Amamiya & Hiroshi Nakaso at the top of the list, given their long-held status as front-runners in that race.
• Looking ahead, Friday’s local docket will be headlined by the latest round of national CPI data.