Futures At Session Lows, Fresh Cycle High For 10YY

In the Tokyo afternoon session, JGB futures are weaker and at session lows, -47 compared to settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined PPI services and international investment flow data. Later, the docket shows Machine Tool Orders (final) for September.
• Bloomberg reported that Daiwa Securities believed the BOJ needed to review its “exceptional” policy of buying corporate bonds at the first opportunity. It is problematic that the bond purchase program, which started in response to the 2008 global financial crisis, hasn’t been discussed much, said Toshiyasu Ohashi, chief credit analyst at Daiwa, one of the top arrangers of corporate bonds in Japan. (See link)
• Cash JGBs are cheaper out to the 20-year, with the belly of the curve underperforming. The benchmark 10-year yield is 3.2bps higher at 0.891%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also a fresh cycle high.
• The swaps curve has twist-steepened, pivoting at the 2s, with rates 0.1bp lower to 2.3bps higher. Swap spreads are tighter out the 10-year and wider beyond.
• Tomorrow, the local calendar sees Tokyo CPI and BOJ Rinban operations covering 3- to 25-year+ JGBs.