Curve Steeper On BoJ Rinban Tweak, Shunto Outcome Eyed

Weakness in the super-long end of the JGB curve dominated, with 20+-Year paper 13-16bp cheaper into the close. The remainder of the JGB benchmarks show 1bp richer to 6bp cheaper as the curve twist steepens. 10-Year JGB yields print ~0.33%.

• The long end weakness was seen on the back of the Y50bn purchases that were deployed in the BoJ’s Rinban covering the 25+-Year zone. This amount is below the lower boundary of the Y100-300bn purchase band for the sector set out in the Bank’s monthly Rinban plan. Prevailing market conditions seemingly emboldened the BoJ when it came to trimming the size of longer dated purchases (there was also a trimming of the Bank’s 5- to 10-Year JGB purchases, to the lower bound of its purchase band in that sector). Weakness in the longer end seemingly capped a rally in the intermediate zone, with futures operating within the lower half of the overnight session range, -44into the bell.
• Swap rates sit 3-11bp higher, with swap spreads wider through 5s then tighter beyond that point.
• One other factor that may have applied pressure to JGBs was growing expectations for a multi-year high round of pay rises in the shunto wage talks.
• Policymaker rhetoric continued to play down any worry surrounding the Japanese banking sector in the wake of the SVB meltdown.
• Lower tier economic data and 20-Year JGB supply headline tomorrow’s local docket.