Bull-Flattening, Rinban Operations Supportive, 10Y Supply Tomorrow

JGB futures are in positive territory, +12 compared to settlement levels, and at the session's best level.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Tokyo CPI data that printed close to expectations.
• (Reuters) Japan is preparing the expansion of budget reserves in the fiscal 2024/25 budget from its planned 500 billion yen ($3.48 billion) to support the recovery from the Noto peninsula earthquake, Finance Minister Shunichi Suzuki said on Tuesday.
• Elsewhere, after finishing yesterday’s NY session with moderate gains across benchmarks, cash tsys have extended those gains by 1-3bps in today’s Asia-Pac session. NFIB Small Business Optimism and Trade Balance is due later today. The market however remains focused on US CPI/PPI inflation measures on Thursday/Friday respectively.
• Today’s BoJ Rinban operations covering 1-5-year and 10-25-year JGBs saw generally lower cover ratios and negative spreads. This likely helped support the market in afternoon trade.
• The cash JGB curve has bull-flattened, with yields 0.3bp to 2.7bps lower. The benchmark 10-year yield is 2.0bps lower at 0.590% versus the Nov-Dec rally low of 0.555%. 10-year supply is due tomorrow.
• Swap rates are slightly lower across all maturities. Swap spreads are wider.
• Tomorrow, the local calendar sees Labor & Real Cash Earnings.