Curve Twist Steepens On U.S. Tsy Bid & JGB Supply Dynamics

The bid in U.S. Tsys away from Tuesday’s cheapest levels has seemingly leaked into JGBs, with the shorter end of the curve also receiving a boost after a Japanese MoF official pointed to the Ministry’s desire to extend the average duration of the JGBs on issue after the measure was skewed lower on the financing of the well-documented COVID-related fiscal packages seen over the last couple of years. Cash JGBs out to 10s are 0.5-1.0bp richer as a result.

• Meanwhile, 20+-Year paper is cheaper as the market sets up for this afternoon’s 30-Year JGB supply and the aforementioned duration extension comments from the MoF weigh, with benchmarks in that zone sitting ~1bp cheaper, meaning that the curve has twist steepened.
• Futures have pared the bulk of their overnight losses, but haven’t got back to neutral, hitting the lunch bell -7, just shy of their Tokyo session peak.