Curve Twist Flattens, Possibly Aided By Lifers Being Active In Long End

The JGB curve twist flattened during the Tokyo morning, with domestic life insurers and pension funds perhaps eying the multi-year high ~120bp pickup for 30-Year yields over 10s as an entry point.

• Although it is hard to be certain of that dynamic given the lack of demand at Wednesday’s soft 30-Year auction.
• Spill over from Wednesday’s late UK Gilt/U.S. Tsy bid may also be supporting longer dated paper.
• Still, a modest downtick in U.S. Tsys during the Tokyo session has seemingly applied pressure to paper out to 7s, as well as JGB futures, with the major cash benchmarks in that zone running ~1bp cheaper on the day, while futures stick to a narrow range, last -3.
• Firmer than expected domestic PPI data likely played into the weakness in the sub-10-Year zone.
• BBG recently flagged that cash 10s have traded, breaking a run of 4 consecutive untraded sessions.
• Friday’s local docket is headlined by 5-Year JGB supply, with the latest round of weekly international security flow data from the MoF also set to provide the usual interest.