Futures Add To Overnight Losses, Curve Twist Steepens

JGB futures added to the bearish impulse derived from U.S. Tsy price action on Friday, extending through post-Tokyo lows registered ahead of the weekend, printing -30 into the bell, a few ticks off session lows. Wider cash JGB trade has seen some twist steepening, with the major benchmarks running 1.0bp richer to 2.0bp cheaper, little changed to richer through 5s and cheaper beyond that point. Cash 10s trade around 0.48% in yield terms, ~2bp off the BoJ’s YCC cap. Swap spreads are wider across the curve, pointing to payside swap flows adding an extra layer of pressure to the JGB weakness (once again most likely influenced by Friday’s broader price action). Local headline flow has been limited since the re-open.

• The weekend saw a reiteration of rhetoric from the IMF re: the BoJ, with the director of the Fund's monetary and capital markets department telling the Nikkei that “if new Bank of Japan Gov. Kazuo Ueda makes any monetary policy changes, careful communication with markets will be key in order to mitigate ripple effects on markets.”
• Elsewhere, Japanese PM Kishida was subject of an apparent smoke bomb attack at a campaign event on Saturday, he was subsequently evacuated with nothing in the way of meaningful injury sustained.
• A liquidity enhancement auction for off-the-run 5- to 15.5-Year JGBs headlines locally tomorrow.