Firming Into The Close, Futures Still Comfortably Lower On The Day

JGB futures are -60 into the bell after extending on the weakness observed in the overnight session.

• A peculiar bid has developed into the close, led by the longer end and presumably some short cover, with the major benchmarks now showing 1bp cheaper to 5bp richer on the day, flattening. The smooth passage of 5-Year supply helped steady the ship earlier in the Tokyo afternoon.
• 2 rounds of unscheduled BoJ Rinban operations helped the space at the margin.
• This came after futures registered a fresh cycle low as speculation re: another BoJ policy tweak intensified, with the next technical levels to watch at vol. band support, situated at 144.14 and 144.02. The contract found a low just above the former in the Tokyo morning.
• 10-Year JGB yields printed above the BoJ’s 0.50% YCC cap, showing as high at 0.568% on the BBG price feed. The measure hovers around 0.510% into the bell.
• 10-Year swap rates (a tool of preference for those testing the BoJ’s will re: YCC) have printed above 1.00% for the first time in over a decade today, and the measure is set to close above that level. Some BoJ watchers have started to tout the potential for a removal of the Bank’s YCC programme as soon as next week, although this is by no means a consensus view. Swap spreads were wider across the curve.
• The BoJ monetary policy meeting headlines next week’s domestic docket.