Firmer In The Afternoon, Despite Positive Risk Tone Elsewhere

JGB futures held to a narrow range in morning trade, before extending higher during the Tokyo afternoon, closing at best levels of the day, +13.

• 20s underperformed on the cash JGB curve, with auction dynamics at play. The latest round of 20-Year JGB supply wasn't as soft as December's 20-Year JGB auction, but wasn't strong by any stretch of the imagination, with some sources of worry (namely BoJ matters) likely facilitating a tentative bidding environment despite the recent outright and relative cheapening of 20s. The tail narrowed a touch, with the cover ratio nudging higher (a reminder that December's 20-Year JGB auction saw the lowest cover ratio witnessed at such an auction since 2015), while the low price met dealer expectations. Still, a sense of relief re: the auction not being as bad as December's offering may have allowed futures to rally during afternoon trade.
• Elsewhere, Finance Minister Aso continued to flag issues with Japans fiscal backdrop, while reports suggested that Okinawa will ask to join the country's COVID state of emergency.
• 1-10 Year BoJ Rinban ops headline locally on Wednesday.