Cheaper After 40Y Supply, Tokyo CPI Tomorrow

JGB futures are holding weaker but above session lows, -16 compared to settlement levels. JGB futures pushed to a new session low in early afternoon trade after the 40-year supply received only tepid demand.

• The actual high yield surpassed dealer expectations and the cover ratio witnessed a decline, dropping to 2.148x from 2.208x observed in the late-November auction. This outcome marked consecutive declines in cover. The cover ratio had steadily increased from May to September. Notably, today's ratio represented the lowest level at a 40-year auction since March 2011.
• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Weekly International Investment Flow data. Later today, the local calendar sees Tokyo Condominiums for Sale, Dept Store Sales and Machine Tool Orders data.
• Cash JGBs are dealing mostly cheaper, with yields 0.5bp lower (2-year) to 5.0bps higher (20-year). The benchmark 10-year yield is 2.5bps higher at 0.743% versus the Nov-Dec rally low of 0.555%.
• The 40-year is 0.7bps higher at 2.089% versus a pre-auction low of 2.069%.
• The swaps curve has bear-steepened, with rates 1-4bps higher. Swap spreads are tighter across maturities, apart from the 40-year.
• Tomorrow, the local calendar sees Tokyo CPI, PPI Services and Coincident & Leading Indices data, along with BOJ Minutes of Dec. Meeting.