Futures At Cheaps At Lunch, Rinban Operations Suggest Slight Pressure On Market

At the Tokyo lunch break, JGB futures traded at a low note, -13 compared to the settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Tokyo CPI that missed on the annual rates for the headline, core, and core-core measures.
• JGBs continue to operate above support at 147.34, the May 26 low. The contract has breached 148.41, the May 12 high. This strengthens a bullish case and signals scope for a climb towards the next key resistance at 149.21/53, highs from May and March. Clearance of these levels would highlight an important break.
• The cash JGBs curve twist steepens at the Tokyo lunch break, pivoting at the 7-year zone. Yield movements range from -0.7bp (5-year) to +1.5bp (40-year). The benchmark 10-year yield is 0.6bp higher at 0.397%.
• This morning’s BoJ Rinban operations saw higher and positive spreads (except for the 3-5-year), and generally slightly higher cover ratios (3-5-year: 2.27x, 5-10-year: 1.52x, 10-25-year: 2.16x and 25-year+: 2.86x), which may generate some slight pressure in early rounds of the Tokyo afternoon session.
• Swap rates are 0.1bp lower to 1.3bp higher across the curve. Swap spreads are wider out to the 5-year and tighter beyond.