Futures At Session Highs At Lunch, Rinban Operations May Provide Support In Afternoon Trading

At the Tokyo lunch break, JGB futures are at session highs, +14 compared to the settlement levels. The move higher in JGB futures was seen alongside pressure on the USD/JPY as Finance Minister Suzuki reiterated that Japan won't rule out any options to address excessive FX moves. US tsy futures also spiked on the comments, although have subsequently pared those gains, with cash US tsys currently sitting 2-3bp richer across the major benchmarks. TYZ3 deals at 110-06, +0-06+.

• The move higher in futures was likely assisted by the previously outlined domestic data drop that was weaker than expected across the board, including labour cash earnings and Q2 (Final) GDP.
• Cash JGBs are richer across the curve, with yields 0.1bp to 0.7bp lower. The benchmark 10-year yield is 0.6bp lower at 0.651%.
• This morning’s BoJ Rinban operations saw negative spreads but mixed outcomes for cover ratios (1-3-year: 1.44xx, 3-5-year: 2.73x, 5-10-year: 2.02x and 10-25-year: 2.02x). Higher for the 3-5- and 5-10-year buckets but lower elsewhere. Overall, the operations may generate some slight support in the early rounds of the Tokyo afternoon session, particularly for the 1-3- and 10-25bp buckets.
• The swap curve has bull-flattened, with swap spreads tighter.