Curve Twist Steepens, BoJ Downgrades Economic View Of Most Regions

JGB futures operate just above session lows as we move towards the close of Tokyo trade, -20 on the day, extending on the overnight weakness that was observed at the backend of last week, although the move through overnight lows was limited and short-lived.

• Wider core FI market dynamics applied the pressure, with Tokyo participants reacting to offshore gyrations/playing catch up to Friday’s post-Tokyo trade.
• Cash JGB trade saw the curve twist steepen with benchmark JGBs running 0.5bp richer to 2.0bp cheaper. The curve pivoted around the 3-Year zone, with 20s providing the weak point on the curve. Note that the weakness in 10s was limited by the proximity to the upper end of the BoJ’s permitted 10-Year yield trading range (10-Year JGBs last deal at 0.24%)
• Local headline flow saw BoJ Governor Kuroda & senior BoJ official Uchida reaffirm the central view of the BoJ when it came to the economic overview and the recent gyrations in the JPY, although there was a little more uncertainty evident re: some of the rhetoric surrounding the Japanese economy. Subsequently, the BoJ downgraded the economic assessment of 8 of the 9 regions that it monitors.