Curve Steepens, With Broader Core FI Bid Doing Little For Super-Long End

The curve was under early Tokyo steepening pressure as participants made room for this afternoon’s 30-Year JGB supply and reacted to Tuesday’s comments from BoE’s Bailey.

• It was a less than convincing round of 30-Year JGB supply which saw the tail widen notably, low price miss broader expectations and the lowest cover ratio seen at a 30-Year auction seen since March ’21.
• It would seem that ongoing market vol., the relative lack of BoJ control over this area of the curve and worry surrounding further cheapening in wider core global FI markets deterred bidders from stepping up.
• The previously flagged FT sources piece re: a potential extension of the BoE’s temporary bond buying scheme then allowed the space to firm into the bell, leaving JGB futures +15 at typing, off best levels, although the contract was fairly resilient when compared to the rest of the JGB space throughout the duration of Tokyo trade.
• Cash JGB trade sees the major benchmarks run 1.5bp richer to 5bp cheaper, with 7s outperforming on the bid in futures and super-long paper still lagging on the day.
• Note that domestic headline flow was dominated by familiar rhetoric from Japanese officials re: FX intervention matters as USD/JPY registered a fresh multi-decade high, breaching September’s intervention zone.
• Tomorrow’s domestic docket is headline by PPI data.