Flatter & Firmer

JGB futures traded either side of late overnight levels during the Tokyo morning, with wider swings in risk appetite at the fore and a lack of notable market moving headline flow evident. A 2.6% morning rally in the Nikkei 225 likely capped the early bid in JGBs.

• The contract hit the bell +9, off Tokyo session lows, but shy of best levels. Early afternoon trade could see the contract receive incremental support from the modest uptick observed in U.S. Tsy futures during the Tokyo break.
• The JGB curve bull flattened this morning, with the major benchmarks running little changed to 2bp richer. This was a product of Thursday’s firming across wider core FI markets, which has perhaps facilitated some lifer-based demand in the longer end of the curve.
• Lunchtime rhetoric from BoJ Governor Kuroda reaffirmed the need for monetary easing, even as he noted that market functioning may be impaired by the BoJ’s actions. He also noted that it is inappropriate to link an exit from the Bank’s ultra-loose policy settings with his term as Governor.
• Elsewhere, comments from FinMin Suzuki reaffirmed well-known views re: wider currency market dynamics.
• BoJ RInban operations revealed the following offer/cover ratios:
• 1- to 3-Year: 2.55x (prev. 1.73x)
• 3- to 5-Year: 2.04x (prev. 1.85x)
• 5- to 10-Year: 3.25x (prev. 2.71x)
• The uptick in cover ratios may apply light pressure in the 1- to 10-Year zone of the curve and could offset any impact from the previously flagged, limited uptick in Tsys.