Futures At Tokyo Session Cheaps At Lunch, LEP For OTR 5-15.5-Year JGBs

At the Tokyo lunch break, JGB futures are dealing just off session lows, -13 compared to settlement levels.

• According to MNI’s technicals team, JGB futures traded lower last week and saw prices take out support at 146.50 to slip to 146.26, just above the Aug 3 low of 146.23. For now, the bear trigger at 146.11, Feb 22 low on the continuation contract, is yet to be tested with downside momentum likely to pick up on any break of that mark. Any return higher would target the May 12 high of 149.21 and 149.53, the Mar 22 high. Clearance of these levels would highlight an important break.
• A thin local docket leaves market participants on headlines and US tsys watch.
• US tsys have firmed off early Asia-Pac session lows, TY has recovered above the 109 handle. There has been little meaningful macro newsflow. Cash tsys sit ~1bps richer across the major benchmarks.
• The cash JGB curve bear steepens, with yields flat to 4.4bp higher (20-year). The benchmark 10-year yield is 2.9bp higher at 0.664%, a post-YCC tweak high.
• Today the MoF will conduct a Liquidity Enhancement Auction for OTR 5-15.5-Year JGBs.
• The swaps curve has also bear steepened, with rates 0.1bp to 1.3bp higher. Swap spreads are narrower.