Curve Flattens As 10-/30-Year Spread Edges Off Multi-Year High

The JGB curve twist flattened during the Tokyo morning, with domestic life insurers and pension funds perhaps eying the multi-year high ~120bp pickup for 30-Year yields over 10s as an entry point.

• Although it is hard to be certain of that dynamic given the lack of demand at Wednesday’s soft 30-Year auction.
• Wednesday’s late UK Gilt/U.S. Tsy bid may also be supporting longer dated paper.
• Still, a modest downtick in U.S. Tsys during the Tokyo morning has seemingly applied pressure to paper out to 7s, as well as JGB futures, with the major cash benchmarks in that zone running ~1p cheaper on the day, while futures stick to a narrow range, hitting the bell -7.
• Firmer than expected domestic PPI data likely played into the weakness in this zone of the curve.
• There isn’t anything to highlight when it comes to the remainder of Thursday’s domestic docket, which will leave cross-market dynamics and relative value plays at the fore.