Bull-Flattening Gathers Momentum In The Afternoon Session Ahead Of The FOMC Decision

JGB futures are richer, +48 compared to settlement levels, and near the Tokyo session high. Futures had initially softened following a stronger-than-expected Q4 Tankan Survey, but that softness has been more than reversed.

• Outside of the Tankan survey, the only potential domestic driver has been today’s BOJ Rinban operations covering 1-3-year, 5-10-year, and 25-year+ JGBs. The operations showed mixed results, with negative spreads but higher offer cover ratios.
• Japan PM Kishida will front the local media today (6:15 pm local time) in which a funding scandal involving his ruling LDP party is expected to feature.
• Cash tsys are dealing ~1bp richer in the Asia-Pac session ahead of tonight’s FOMC rate decision. PPI data is released beforehand.
• Today’s bull-flattening of the cash JGB curve has gathered momentum in the afternoon session following the BOJ Rinban operations, with yields 0.6bp to 5.4bps lower. The benchmark 10-year yield is 1.7bps lower at 0.704% versus the morning’s high of 0.735%.
• The swaps curve has also bull-flattened, with swap spreads mixed.
• Tomorrow, the local calendar will show Core Machine Orders, International Investment Flow, IP and Capacity Utilisation data. The MOF also plans to sell Y1.2tn of 20-year JGBs.