Early Tokyo Bid Fades From Extreme

The bull flattening of the JGB curve extended at the Tokyo re-open, as the impulse from the BoJ Rinban plan tweaks for Q2 (announced after Tokyo hours yesterday) initially provided support, before the broader FI cheapening evident since late NY trade limited the rally (40s failed to cross back below 0.90% in yield terms) and started to apply some pressure. Note that 10-Year yields traded as low as 0.195% this morning but sit around 0.205% ahead of the close. Cash JGBs sit little changed to 2.5bp richer across the curve, with the early bull flattening giving way to bely outperformance.

• •Early Tokyo futures trade was two-way and volatile in nature, given the above inputs, with a show above the overnight high, before gains were pared back. That left the contract +9 late in the Tokyo day.
• •There hasn’t been much in the way of market pertinent local news flow to outline.
• •The latest BoJ Tankan survey saw large businesses downgrade their outlook (although the related readings were mostly in line to a touch better than expected), with a similar story playing out for small firms. Do note that large firms’ capex expectations moderated, providing a softer than expected reading.