Futures At Session Lows, Rinban Operations Suggest Slight Pressure On Market

At the Tokyo lunch break, JGB futures are trading on a negative note, -47 compared to the settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined balance of payments and bank lending data.
• Accordingly, local participants have been on headlines and US tsys watch.
• Tsys have been pressured in recent dealing and sit a touch-off session lows despite weaker-than-expected China CPI data. There has been no obvious headline driver for the move, participants are perhaps focusing on the stronger-than-forecast AHE from Friday's NFP report and Goolsbee’s relatively hawkish Fedspeak which also crossed on Friday.
• This morning’s BoJ Rinban operations saw higher and positive spreads but slightly lower cover ratios other than the 5-10-year zone (1-3-year: 2.88x, 5-10-year: 1.62x, 10-25-year: 1.68x and 25-year+: 2.28x), which may generate some slight pressure in early rounds of the Tokyo afternoon session.
• The cash JGBs curve bear steepens with yields 0.2bp to 6.0bp higher with the 20-year zone as the underperformer ahead of Thursday's supply. The benchmark 10-year yield is 3.3bp higher at 0.461%, still below the BoJ's YCC limit of 0.50%. The benchmark 5-year is 1.5bp cheaper at 0.116%, outperforming on the curve, ahead of tomorrow’s supply.
• Swap rates are higher across the curve with rates 0.6bp to 4.0bp higher. Swap spreads are mixed.