Futures Cheaper In Early Tokyo Trade

JGB futures initially built slightly on the downtick in post-Tokyo trade ahead of the weekend, before recovering from early Tokyo lows to sit -8.

• In the absence of economic data releases or notable news, local participants' reaction to the cheapening in US Tsys trading ahead of the weekend likely influenced the Tokyo open, along with the aforementioned speculation that the BoJ may begin the assessment of its ultra-loose policy settings later this week (third party newswire reports had said that the Sankei suggested this "would" take place this week, although that has now been corrected to "may"), although the review is unlikely to result in any policy moves in isolation (it could shape future YCC moves/abandonment).
• JBM3 remains comfortably in the range of 147.40-147.92, which it has generally traded in since early April, barring a few probes through the lower limit last week.
• MNI's technical analyst suggests that the decline in JGB futures to the previous week's low of 147.27 may be considered a corrective move. If the futures surpass the 20-day EMA at 147.65, it could draw attention towards the Mar 22 high of 149.53. On the other hand, if the futures drop below 147.27, it may indicate a more profound retracement towards the March 13 low of 145.80.
• Cash JGB curve twist flattens with yields in the 1-3-year zone 0.1-0.7bp higher and yields beyond 0.1-0.8bp lower.
• Swap rates are a touch higher across much of the curve.