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Cheaper After The Holiday, But Off Lows

JGBS

JGB futures are a touch above worst levels, last -19 on the day. Meanwhile, cash JGBs sit 0.5-2.5bp cheaper across the curve, bear steepening.

  • Tokyo participants played catch up after their three-day holiday, with firmer than expected Tokyo CPI data (largely driven by a waning impact of lower mobile phone costs and the well documented jump in energy prices) also factoring into the weakness that was observed. Re: the latter, this will not impact BoJ policy, given the Bank’s continue focus on a lack of demand-pull inflation.
  • Payside flows in swaps also seemed to help the weakness, with 5+-Year swap spreads wider on the day.
  • The BoJ continues to offer fixed rate operations on a daily basis as it looks to hammer home its commitment to enforcing the upper end of its permitted 10-Year JGB yield trading band. Note that 10-Year JGB yields sit at ~0.24%, 1bp shy of the BoJ’s YCC upper limit.
  • Off-the-run supply saw the spreads widen a touch via the prior 1- to 5-Year liquidity enhancement auction, while the cover ratio ticked higher. There was nothing in the way of meaningful reaction post-supply, with the stabilisation away from lows in wider core FI markets helping JGBs find a bit of a base after the Tokyo lunch break.
  • Domestic news flow focused on the further wind back of COVID-related border restrictions.
  • Looking ahead, wage data headlines the domestic docket on Monday, with the latest round of BoJ Rinban operations and outdated meeting minutes from the Bank’s March MPM also slated.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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