Curve A Touch Flatter

JGB futures coiled for much of the day, sticking comfortably within the confines of their overnight range, last -8, consolidating modest overnight session losses as we head towards the bell.

• Cash JGB trade has seen some light twist flattening, with the major benchmarks running 0.5bp cheaper to 1.0bp richer. Note that there has been a lack of steepening pressure for JGBs today, despite what was seen in global bond markets on Tuesday (super-long JGBs had come under selling pressure during the first two sessions of the week).
• The latest round of speculation surrounding fiscal matters failed to generate anything in the way of a notable market reaction.
• Meanwhile, Japanese PM Kishida confirmed speculation that vaccinated travellers will not have to take COVID tests when visiting Japan (from 7 September), although there was no news on the potential upping of the number of permitted daily inbound travellers.
• BoJ Rinban operations covering 1- to 10-Year JGBs saw steady to slightly lower offer/cover ratios, which may have provided some light support to that area of the curve during early afternoon dealing, although that zone now underperforms on the day.
• Looking ahead, services PPI data, the weekly international security flows and an address from BoJ’s Nakamura provide the domestic highlights on Thursday. There will also be a liquidity enhancement auction for off-the-run 15.5- to 39-Year JGBs.