Curve Twists Flatter, Futures Little Changed

JGB futures hit the bell +1 after wider moves in core global FI markets saw the contract unwind the uptick witnessed in the early part of the Tokyo session. Wider cash JGBs sit 2bp cheaper to 2bp richer as the curve twist flattens, pivoting around 30s.

• The early bid was aided by soft domestic spending and wage data, an uptick in U.S. Tsys and BoJ Governor Kuroda reiterating the need for continued monetary easing, as he once again pointed to the BoJ’s goals and stressed that now is not the time to debate the BoJ’s policy framework/an exit from ultra-loose settings (after BoJ board member Tamura pointed to the need for such discussions “at the right time”).
• Flattening held even against a lukewarm round of 30-Year JGB supply, which saw the cover ratio soften and price tail widen vs. last month’s offering, albeit conducted at lower prevailing yields. Note that the low price also printed below wider dealer expectations. The richness we flagged on the 20-/30-40-Year butterfly pre-auction was probably an impediment for demand. 30s cheapen a touch post-auction, while JGB futures tick lower (albeit with some of those moves representing catch up vs. U.S. Tsy price action in the Tokyo lunch break).
• Looking ahead, the latest round of BoJ Rinban operations and comments from BoJ’s Nakamura headline the Tokyo docket on Wednesday.