Futures Coil, Cash Mixed, Swap Rates Lower

JGB futures nudged away from worst levels of the Tokyo morning, failing to deviate meaningfully from late overnight session levels, hitting the lunch bell +12. Cash JGBs out to 20s were mixed, with 10-Year yields continuing to show through the upper limit of the BoJ’s permitted YCC band for a third straight day (further evidence of basis trades vs. futures being at work). 30+-Year paper was richer.

• Receiver side swap flows seemed to limit any selling pressure in the space, with benchmark rates on that curve running 1.5-2.5bp lower, potentially pointing to a paring back of positioning into tomorrow’s BoJ decision.
• There hasn’t been anything to add from a domestic fundamental perspective vs. our earlier bullets, with the space also looking through the latest GDP print out of China, as participants focus on idiosyncratic matters.