Futures At Session Highs, Curve Twist Flattens

In the Tokyo afternoon session, JGB futures have rebounded to a new intraday high, +27 compared to the settlement levels. The strengthening through to session appeared to reflect both domestic and offshore factors.

• Locally, the BOJ announced an unscheduled bond purchase of ¥300bn worth of 5-to-10-year bonds and ¥100bn of 10-to-25-year JGBs at market prices. After some initial volatility, benchmark yields have moved lower by around 1-2bps across benchmarks.
• There hasn’t been much in the way of domestic data to flag outside of the previously outlined Jibun Bank PMI data. September Department store sales are due later today.
• Assisting the afternoon strengthening in JGBs has been firming in US tsys from session lows. Cash US tsys are 1.5bp cheaper to 1bp richer, with the curve twist-flattening, pivoting on 5s.
• The cash JGB curve has also twist-flattened, pivoting at the 3s, with yields 0.7bp higher to 3.5bps lower. The benchmark 10-year yield is 2.2bps lower at 0.855% versus the cycle high of 0.882% set yesterday.
• The swaps curve has bull-flattened, with rates flat to 2.2bps lower. Swap spreads are wider beyond the 3-year.
• Tomorrow, the local calendar sees Leading and Coincident Indices for August (Final) alongside a Liquidity Enhancement Auction for 15.5-39-year JGBs at 1700 JT.