Firm Into The Bell, Futures Breach Post-BoJ Peak

A morning bid in JGBs extended during the Tokyo afternoon, with the subdued offer/cover ratios in today’s BoJ Rinban operations adding further fuel to the fire.

• Futures are near enough +70 into the bell, a little shy of best levels, but through the post-BoJ spike peak. That breach allows bulls to turn focus to the zone that consists of the 6 Dec low & 16 Nov high.
• Cash JGBs are 2-8bp richer across the curve, led by 7s (owing to the bid in futures). Swap rates are still lagging across most of the curve, leaving swap spreads wider to near enough flat, dependent on the zone of the curve you are looking at.
• As noted earlier, there hasn’t been much in the way of meaningful headline flow to highlight, meaning continued post-BoJ adjustments and the lack of upside surprise in the national CPI data (albeit with the major metrics moving to fresh cycle highs in Y/Y terms) were likely in the driving seat early on.
• PM Kishida pointed to a desire to downgrade the government’s assessment of COVID to the same risk category as the flu, with an eye on doing so during the Spring.
• Elsewhere, Finance Minister Suzuki has noted that any review of the 60-Year debt redemption rule would not alter overall JGB issuance matters, although cautioned against making any change to the rule, owing to the positives generated re: fiscal discipline.
• The minutes from the BoJ’s Dec meeting (which saw the surprise YCC tweak) headline domestically on Monday.