Futures At Session Lows, JGB Curve Bear Steepens

In the Tokyo afternoon session, JGB futures are weaker and near session lows, -37 compared to settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Jibun Bank Services and Composite PMIs.
• Accordingly, JGBs have likely found direction from US tsys, which have extended overnight weakness. Cash tsys are flat to 5bps cheaper across benchmarks, as the NY session’s bear-steepening extends into the Asia-Pac session.
• The cash JGB curve has bear-steepened, with yields 0.7bp to 3.8bps (20-year) higher. The 30-40-year zone is 2.1-2.9bps cheaper. The benchmark 10-year yield is 2.2bps higher at 0.788%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also slightly below the cycle high of 0.798% set earlier today.
• Bloomberg noted that Japan’s 10-year OIS has risen to 1% for the first time since January amid growing speculation the central bank will end its negative interest rate, which caused a spike in sovereign long-term yield. (See link)
• The swap curve has also bear-steepened, with rates 0.5bp to 4.0bps higher. Swap spreads are generally wider, apart from the 7-20-year bucket.
• Tomorrow the local calendar sees International Investment Flow data, along with 30-year supply.