Futures At Cheaps, Weighed By 40-Year Supply

JGB futures are 148.44, -17 versus settlement levels, after pushing to 148.41, a Tokyo session lows and the lowest level since May 9.

• 40-year supply appeared to weigh on the market despite being successfully absorbed by the market. While the high yield came in below dealer expectations, the cover ratio, which indicates demand, declined to 2.377x compared to 2.694x at the late-March auction. It appears the overall flattening and richening of the yield curve reduced demand relative to the late March auction, as flagged in our auction preview.
• Cash JGBs weaken in afternoon Tokyo trade with yields higher across the curve. Yield movements range from 0.2bp higher (40-year) to 1.4bp higher (7-year). The benchmark 10-year yield is 1.1bp higher at 0.425%, below the BoJ's YCC limit of 0.50%. The 40-year yield moved 1.5bp higher in post-auction trade.
• The swaps curve bear steepens with swap spreads wider beyond the 1-year zone.
• The local calendar sees Tokyo CPI scheduled along with the weekly 3-month bill auction.
• Later today sees the release of Q1 US GDP (2nd estimate). Nonetheless, the market attention is likely to remain on US debt ceiling negotiations.