Early Flattening Gives Way As Super-Long End Struggles In Wake Of Rinban Details

The early bull flattening on the JGB curve unwound during the Tokyo afternoon, after an early bid in the long end faded in the wake of the publishing of the details of the latest round of BoJ Rinban operations (the offer/cover ratios in the operations covering 10+-Year JGBs weren’t standout, but some desks flagged the operations as potential catalyst nonetheless). Cash JGBs run 1bp richer to 1bp cheaper across the curve, with 7s outperforming on a bid in futures and the 20- to 30-Year zone providing the weak point.

• The early bid was seemingly aided by speculation surrounding the potential upsizing of BoJ bond buying guidance in the quarterly Rinban plan, which will be released after hours today (some expect larger buys in the 10- to 25-Year zone).
• 10-Year JGB yields hover just below the upper limit of the BoJ’s permitted trading band.
• Participants looked through a familiar upsized round of 5- to 25-Year BoJ Rinban ops on Friday.
• Futures held a relatively tight range after showing above their overnight high during the Tokyo morning, before fading to last deal +12.
• The aforementioned Rinban plan will likely set the tone for JGB trade early next week, with the summary of opinions from the BoJ’s latest monetary policy meeting and the quarterly Tankan survey headlining Monday’s docket.