Firmer & Flatter During The Afternoon

JGB futures have pulled higher during the Tokyo afternoon, looking above their overnight session high to last trade +19 on the day. Meanwhile, cash JGB trade sees the major benchmarks trade unchanged to 2bp richer, with 7s and the 20+-Year zone outperforming

• The continued presence of the BoJ in the market may provide the explanatory factor here. The latest round of BoJ Rinban operations saw the following offer/cover ratios:
• 1-to 3-Year: 2.47x (prev. 1.92x)
• 3-to 5-Year: 2.23x (prev. 2.28x)
• 25+-Year: 3.22x (prev. 4.38x)
• The moderation in cover ratio covering 25+-Year JGBs may have provided a bid for the super long end, although it is a little firmer than we would expect. An associated run higher in the liquid futures contract likely explains the bid in 7s.
• Receiving of OIS also looks to have played into the move, with JGB/OIS spreads tighter across the curve.