Curve Steepens, 20s Top 1%

JGB futures traded through their overnight base at the re-open, printing at the lowest level observed since June in the process (based on a continuation chart), as Tokyo reacted to Monday’s Gilt-centric weakness in core global FI metrics.

• The contract has edged away from worst levels, with spill over from a bid in U.S. Tsys probably providing some support.
• The 20 June low (147.07) now provides the initial point of technical support for JGB futures.
• Cash JGBs run little changed to 3.5bp cheaper across the curve on the same dynamic, with 20+-Year yields registering fresh cycle highs in the process. Super-long paper is far less constrained by BoJ purchases than paper out to 10s (given the structuring of the Bank’s YCC mechanism). This has allowed 20-Year JGB yields to move above the 1.00% level for the first time since early ’16.
• 10-Year JGB yields are pressing up against the upper limit of the BoJ’s YCC mechanism.