Contained Swings Largely Derived From Core Global Fi Moves

Spill over from wider core global FI markets was largely in the driving seat on Monday, with JGB futures initially showing just through their overnight session high, before fading, then stabilising off session lows. That leaves the contract +6 into the bell, with cash JGBs running little changed to 2bp richer, as 7s outperform on the curve.

• Swaps saw a bull flattening move, sitting 0.5-2.0bp lower, leaving swap spreads mixed.
• A modest round of cheapening in the super-long end after the BoJ’s 25+-Year Rinban purchases were scaled back by Y50bn was quickly unwound on the subdued offer/cover ratio seen in that bucket.
• 20-Year JGB supply and flash Jibun Bank PMIs headline locally on Tuesday.
• Further out, Japanese PM Kishida’s nominee to succeed outgoing BoJ Governor Kuroda, Kazuo Ueda, will appear at a confirmation hearing in the lower house of parliament on Friday. The government has touted Ueda’s communication skills as a major factor behind his nomination. A reminder that the Bank is expected to move away from ultra-loose policy settings in the post-Kuroda era and this hearing could give the first meaningful insight into Ueda’s preferences when it comes to policy settings.
• Some BoJ watchers have outlined their views re: the risk of a further YCC tweak at the BoJ’s March meeting, which could put less pressure on Ueda during the early days of his governorship.