Futures Cheapen Into Close, Long End Leads After Decent Demand At Auction

JGB futures pull away from best levels to print -15 ahead of the bell. There hasn’t been much in the way of meaningful headline flow to tout, with ex-BoJ board member Shirai pointing to the benefits of a more flexible inflation target (a matter that is already being considered by the BoJ and government, per recent press reports), while suggesting that a fundamental shift in monetary policy is unlikely, stressing that the recent YCC tweak was based on promoting sustainable monetary policy.

• Cash JGBs sit 0.5-4.5bp richer across the curve, with the long end leading and intermediates lagging.
• A fairly well-received round of 30-Year JGB supply, coupled with a bounce from Tuesday’s lows in U.S. Tsys and an unscheduled round of 1- to 25+-Year BoJ Rinban purchases (in addition to unscheduled fixed rate 1- to 5-Year JGB purchases) helped support JGBs before the aforementioned pullback in futures into the close.
• That came after news that the Japanese MoF is looking at extending the average duration of JGBs on issue, coupled with pre-auction concession promoted some twist steepening of the curve in the Tokyo morning.
• Looking ahead, BoP data & BoJ Rinban purchases headline domestically on Thursday.