Early Swap Receiving Supports Long End, 20-Year Supply Well Received

JGB futures drew support from the curve flattening evident in cash JGB trade, with the contract last +5 vs. Tokyo settlement levels. In terms of the bull flattening witnessed in cash trade, it looks like receiving in super-long swaps was the driving factor, with 30- and 40-Year swaps tighter vs. their JGB equivalents for most of the day. There has been a lack of macro headline flow, and the aforementioned round of swap receiving looks to have offset any U.S. Tsy/20-Year JGB supply related pressure.

• The latest 20-Year JGB auction passed smoothly, with the carry on offer likely underpinning demand as the low price topped expectations (BBG dealer poll of 100.00), cover ratio nudged higher and tail narrowed vs. previous auction. The lower % allocated at the high yield was also noted, given the narrower tail.
• The second round of 84-day BoJ US$ ops covering year end saw 0 demand (as was the case in last week's ops), pointing to sanguine year-end $-funding conditions, at least on the part of Japanese banks.
• 1-10 Year BoJ Rinban ops headline locally on Wednesday.