Curve Notably Steeper, Futures Lower But Not Challenging Recent Base

Futures hit the lunch bell -54 vs. Thursday’s settlement, with the bulk of the movement coming during the early rounds of Tokyo trade.

• Wider FI market dynamics in the driving seat, as opposed to idiosyncratic matters.
• Last week’s low (147.94) in the contract wasn’t tested and continues to provide initial technical support.
• Cash JGB trade saw the major benchmarks run 1.0-.7.5bp cheaper, with 10-Year yields being capped by the upper limit of the BoJ’s YCC mechanism.
• 20s and 40s have registered fresh cycle highs on the move.
• Familiar language was deployed by Japanese Finance Minister Suzuki, which failed to impact JPY, as you would expect.
• BoJ Rinban operations drew the following offer/cover ratios:
• 1- to 3-Year: 2.74x (prev. 1,73x)
• 3- to 5-Year: 2.15x (prev. 1.66x)
• 5- to 10-Year: 2.13x (prev. 3.27x)
• Offer/cover levels remain contained, even with 10-Year yields challenging the upper limit of the BoJ’s YCC.