Firmer & Flatter

JGB futures nudged higher at the Tokyo re-open, as local participants reacted to Tuesday’s richening in wider core global FI markets, before the contract eased back towards late overnight session levels, hugging a tight range, last +11.

• Cash JGBs sit little changed to ~4bp richer across the curve, with super long end demand evident (domestic life insurers may be at work further out the curve) during the Tokyo morning, allowing a bull flattening theme to develop.
• BoJ Rinban operations revealed a downtick in the offer/cover ratios covering 1- to 3-, 5- to 10- & 25+-Year paper, which probably provided some incremental support to the space during the Tokyo afternoon.
• Note that the richening in JGBs came even as swap rates moved higher, pulling swap spreads wider from both sides of the equation.
• Looking ahead, 20-Year JGB supply headlines Thursday’s local docket.