Flatter, Even As 30-Year Auction Presents A Soft Outcome

Tuesday provided a relatively subdued round of trade for the JGB space.

• The JGB curve has bull flattened, initially playing catch up to Monday’s move in Tsys, with the flattening impetus extending through the day. The major cash benchmarks run little changed to ~4bp richer across the curve.
• Meanwhile, JGB futures have coiled, last +12, sticking to a tight range since the Tokyo re-open, failing to challenge their overnight session peak.
• Local headline flow has been limited, outside of speculation surrounding the impending government cabinet reshuffle.
• A soft round of 30-Year JGB supply saw the low price miss wider expectations, with the width of the tail widening a touch and cover ratio moving to the lowest level observed at a 30-Year JGB auction since October ’21. It would seem that the degree of the move away from outright cycle cheaps and pre-action richening provided enough of a reason for the lifer & pension community to stay on the sidelines. 30s saw some incremental cheapening post-auction, while JGB futures move a couple of ticks lower, before a bid came back in.
• Looking ahead, PPI data and BoJ Rinban operations covering 1- to 10-Year JGBs headline the domestic docket on Wednesday.