Curve Steepens, BoJ YCC Cap Tested

JGB futures look through their overnight base, with global impulses remaining in the driving seat given the lack of domestic steer.

• JGB futures are -20 at typing, with technical support located at the 2.0% Bollinger Band (146.33). The contract remains in a broader holding pattern after the January volatility.
• Cash JGBs run little changed to 2.5bp cheaper, with 10s limited as they bump up against the BoJ’s YCC cap, while the super-long end is coming under the most pressure, resulting in curve steepening. A similar, although more linear, dynamic has been seen on the swap curve.
• Q4 corporate performance data saw softer than expected sales and profits readings, while capex provided upside surprises (note the well-documented inflationary impulse will be at work when it comes to the capex numbers, making it harder to read the data).