Cash Bond Steeper After Lacklustre 20Y Auction

JGB futures are slightly stronger and in the middle of today’s range, +5 compared to the settlement levels.

• Today’s 20-year auction low price met dealer expectations, however, the cover ratio declined to 3.4223x from 3.8016x and the auction tail lengthened.
• As highlighted in the auction preview, today’s auction presented an outright yield that was 20bps lower than July’s level. Additionally, the 10/20 yield curve was slightly flatter, and the 20-year JGB was significantly richer relative to the 10/20/30 butterfly than in July.
• Today, the local calendar will see Tokyo Condominiums for Sale data later.
• Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session. Attention seems focused on the KC Fed-hosted Jackson Hole economic symposium, which will be held Aug. 22-24. Fed Chairman Powell speaks at 1000ET Friday morning.
• Cash JGBs are little changed out to the 20-year and ~2bp cheaper beyond. The benchmark 10-year yield is 0.8bp lower at 0.898% versus the cycle high of 1.108%.
• Swap rates are ~1bp lower out to the 30-year zone, and 4ps higher beyond. Swap spreads are mixed.
• Tomorrow, the local calendar will see Trade Balance data alongside BoJ Rinban Operations covering 1-10-year JGBs.