Flattening Extends Even As U.S. Tsys Soften & With 20-Year Supply Lingering

The early flattening of the curve extended through the Tokyo morning, with long end demand remaining apparent even as U.S. Tsys cheapened (albeit after yesterday’s notable twist flattening of the Tsy curve), with no sign of concession related to the impending 20-Year auction. This points to continued demand from the domestic pension fund and life insurer cohort, given the lack of attractive offshore bond propositions noted at present.

• That leaves the major cash JGB benchmarks running flat to ~4.5bp richer across the curve, although JGB futures have backed away from their overnight peak, hitting the lunch bell +8.
• Parliament-based headline flow from the BoJ, headlined by Governor Kuroda, provided little in the way of fresh information, while Japanese Finance Minister Suzuki also went over old ground.
• Japanese trade balance data failed to provide any impetus for the space, as is the norm.
• The aforementioned 20-Year JGB auction headlines the domestic docket this afternoon.