Futures At Session Highs, Smooth Absorption Of 30-Year Supply

JGB futures are sitting at session highs in afternoon Tokyo trade at 148.76, +18 versus settlement levels, after 30-year supply is smoothly absorbed but with less demand evident than in the May auction.

• JGB futures continue to operate close to recent lows, with 148.48 marking the near-term support. According to MNI's technicals team, the recent bounce off the lows helped stall a more protracted pullback, although the gap with key resistance at 149.17 remains.
• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined April labour cash earnings and household spending data, which surprised on the downside.
• Cash US tsys are trading above Asia-Pac cheaps but yields remain 1.2bp to 2.7bp higher.
• Cash JGBs are flat to slightly richer across the curve beyond the 1-year zone. The benchmark 10-year yield is 0.6bp lower at 0.428%.
• The 30-year zone is outperforming on the curve with its yield 1.8bp lower at 1.262% after today’s auction showed smooth digestion, albeit with slightly less demand exhibited than at the previous auction. While the low price met dealer expectations the cover ratio ticked down and the tail widened.
• Swap rates are 0.3-2.2bp lower across the curve with swap spreads tighter.