Futures And Related Cash Zone Outperforms, Rest Of Curve Cheapens

Little to really add to our previous rounds of commentary surrounding JGBs. The rally in the belly to intermediate zone of the curve (5- to 7-Year) was sector specific, leaving that zone ~1bp richer on the day at the lunch bell. The remainder of the JGB curve was little changed to 3.5bp cheaper, with the super-long end leading the weakness. JGB futures are 15 ticks higher on the day at the break, but bulls haven’t forced a meaningful challenge of Friday’s peak.

• Swap rates are now 0.5-1.0bp lower across the curve, more than reversing the early move higher (which was of a similar magnitude).
• While there hasn’t been any overt headline flow to trigger the move in the 5- to 7-Year of the JGB curve, nor the reversal in swaps, those gyrations may reflect some setup ahead of the results of the BoJ’s 5-Year offering through its Funds-Supplying Operations, or it may simply be related to the move in futures.