Curve Twists Steeper

JGB futures failed to breach their overnight cycle low in the Tokyo morning, tracking broader swings in core FI markets, which mainly took their lead from U.S. Tsys. The contract hit the bell 8 ticks below Tuesday’s settlement levels as a result.

• The presence of BoJ Rinban operations supported paper out to 5s, with the benchmarks in that area of the cash JGB curve trading little changed to 0.5bp richer at the break. The overnight cheapening in U.S. Tsys (which has extended a little further in Asia-Pac dealing) provided some impetus further out the curve, with JGB benchmarks in that area running 0.5-2bp cheaper, as 30s lead the way lower, promoting twist steepening.
• Today’s BoJ Rinban operations generated the following offer/cover ratios
• 1- to 3-Year: 1.95x. (prev 2.37x)
• 3- to 5-Year: 2.11x. (prev 1.85x)
• 5- to 10-Year: 2.50x. (prev 1.59x)
• The movement in the cover ratios isn’t particularly significant but could promote some modest twist steepening out to 10s in early afternoon dealing.
• There hasn’t been much in the way of local news flow to digest, outside of the continued speculation in the press surrounding the potential for fresh fiscal support to fight the cost-of-living crisis.