Futures Below March Lows, 20Y Auction Showed Mixed Results, 2YY Highest Since 2009

JGB futures are sharply weaker, -68 compared to settlement levels, and at session lows after today’s 20-year supply delivered mixed demand metrics. Today’s result was disappointing, particularly after April’s 10- and 30-year JGB supply set a positive tone for a market that had been under pressure since mid-December due to anticipated policy tightening by the BoJ.

• The 20-year yield is dealing 3bps cheaper at 1.662% in post-auction trade and less than 10bps below the cycle high set in October.
• Today’s data drop failed to be market-moving.
• According to MNI’s technicals team, a stronger reversal higher is required to signal the end of the recent corrective phase. The bull trigger has been defined at 147.74, the mid-January high. A break would resume the uptrend. Moving average studies remain in a bull-mode set-up, highlighting an uptrend.
• Cash JGBs are sharply cheaper, with the 20-40-year zone underperforming (around 9bps cheaper). The benchmark 10-year yield is 5.6bps higher at 0.862%, a fresh YTD high. The 2-year yield reached 0.272%, the highest level since 2009.
• The swaps curve has bear-steepened, with rates flat to 9bps higher. Swap spreads are mixed.
• Tomorrow, the local calendar sees Industrial Production and Capacity Utilisation data alongside BoJ Rinban operations covering 1- to 10-year JGBs.