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Futures At Tokyo Session Cheaps & Curve Steepens After Poor Absorption Of 20Y Supply


JGB futures are cheaper, -28 compared to settlement levels, after pushing to Tokyo session lows following the results of today’s 20-year supply. 20-year supply saw poor digestion as the low-price printed below dealer expectations and the cover ratio at 2.973x declined sharply versus 3.942x at last month’s auction. The auction tail also lengthened dramatically.

  • The local calendar was light today, with the Tertiary Industry Index (-0.1% m/m vs. +0.3% est. and +1.1% prior) as the sole release.
  • In addition to domestic supply concerns, local participants have likely eyed US tsys in the Asia-Pac session after the bear-steepening observed during the NY session. Cash US tsys are flat to 5bps cheaper, with the curve steeper.
  • The cash JGB curve has bear-steepened today, with yields 0.3bp to 5.2bps higher. The benchmark 10-year yield is 1.6bps higher at 0.777% versus the cycle high of 0.814%.
  • The 20-year JGB is dealing 4-5bps cheaper at 1.598%, just shy of the cycle high of 1.606%, in post-auction dealings.
  • The swaps curve has also bear-steepened, with rates 0.5bp lower to 6.6bps higher. Swap spreads are mixed across maturities.
  • Tomorrow, the local calendar is light again, with Tokyo Condominiums for Sale data as the only release.

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