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Futures Cheaper Ahead of 5-15.5 Years Liquidity Enhancement Auction

JGBS

JGB futures are sitting weaker, but off the session’s weakest level, at the lunch break, -21 versus settlement levels.

  • There have been limited domestic factors of note, aside from the previously mentioned April CPI, which aligned closely with expectations and exhibited the highest annual core rate since the early 1980s.
  • Strong inflationary data could potentially spark speculation of upward revisions to the BOJ's price projections, refocusing attention on the possibility of a monetary policy adjustment that may impact the bond market.
  • Cash JGBs are cheaper across the curve at lunch, apart from the 2-year zone which is 0.2bp richer. Yields beyond the 2-year zone are flat to 1.9bp higher with the 7-year zone leading. The benchmark 10-year yield is 1.3bp higher at 0.405%, with the 40-year yield 1.3bp higher at 1.438% ahead of next week’s auction (May 25).
  • Swap rates are slightly higher across the curve with swap spreads narrower except for the 4-5-year zone.
  • The MoF plans to sell Y6.3bn of 3-month bills as well as sell Y500bn of JGBs with 5-15.5 years until maturity in a liquidity enhancement auction.
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