Curve Twist Flattens, Signs Of Domestic Demand Propping Up Long End

JGB futures traded off of external factors, with the previously alluded to situation surrounding Tuesday’s missile situation in Poland (which killed 2 civilians) front and centre. Ultimately blame re: the matter was not laid at the feet of Russia and signs of a ‘friendly fire’ type of incident started doing the rounds.

• This saw the contract more than unwind its overnight gains, printing -9 into the bell.
• Meanwhile, cash JGBs saw some twist flattening, running 1.5bp cheaper to 2.5bp richer, pivoting around 10s. The lack of appeal when it comes to foreign bonds on the part of Japanese investors (owing to ongoing market vol. and elevated FX-hedging costs) may have contributed to this twist flattening, with the life insurer and pension fund community perhaps enticed by outright super-long JGB yield levels given the recent downside surprises in (still elevated) U.S. inflation ppints and the BoJ’s on hold stance.
• Local headline flow was limited at best.
• Looking ahead, Thursday’s local docket will be headed by trade balance data and 20-Year JGB supply. The weekly international security flow ledger from the MoF will also cross.