Firming Extends, Futures Break BoJ Spike Peak

The early Tokyo rally extended through the morning session, leaving the contract +24 at the lunch bell, after breaking through its post-BoJ spike peak. That breach allows bulls to turn focus to the zone that consists of the 6 Dec low & 16 Nov high, granted, those points are some distance away. Cash JGBs run 1.0-6.5bp richer across the curve, bull flattening. Swaps lag the move in JGBs across most of the curve, leaving swap spreads flat to wider on the day.

• 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) are likely in the driving seat.
• Recently released details covering this morning’s BoJ Rinban operations revealed subdued offer/cover ratios (1.4-2.2x), which will please the BoJ, with the market less willing to test the BoJ’s resolve post-YCC setting affirmation and tweak to the Bank’s Principal Terms and Conditions for Funds-Supplying Operations against Pooled Collateral.
• Recent comments from 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.