Curve Steepens A Little More

JGB futures held lower as we moved through the Tokyo morning, hitting the lunch bell -14, respecting the base of its overnight range in the process.

• Cash JGBs run flat to 3bp cheaper across the curve, with bear steepening in play. 10s are limited by their proximity to the upper end of the range permitted by the BoJ’s YCC settings and 7s sold off more than surrounding lines on the weakness in futures.
• BoJ Governor Kuroda reiterated his previous musings re: the need for continued monetary easing, while Finance Minister Suzuki and top FX diplomate Kanda reiterated their own recent musings re: FX matters.
• Japanese PM Kishida once again highlighted the BoJ’s independence when it comes to setting monetary policy, while pointing to the need for continued government-BoJ cooperation, which will factor into his choice for Kuroda’s successor.
• A steady to higher round of offer/cover ratios in today’s BoJ Rinban operations may apply some light pressure in early afternoon dealing, particularly in the long end, given the recent upsizing of purchases there. The cover ratios were as follows:
• 1- to 3-Year: 3.27x (prev. 3.25x)
• 5- to 10-Year: 3.04x (prev. 2.06x)
• 25+-Year: 3.89x (prev. 3.49x)