Futures Dealing At Session Cheaps In Tokyo Afternoon Trade

In afternoon trade, JGB futures are dealing near Tokyo session lows, -14 compared to settlement levels.

• A thin local docket on Monday left participants on headlines and US tsys watch.
• US tsys have been pressured after China held the 5-Year LPR steady at 4.20%, a cut of 15bps had been expected. The 1-Year LPR was cut 10 bps when a cut of 15bps was expected. Regional equities are lower, and the USD is marginally firmer. Cash tsys sit 1-3bps cheaper across the major benchmarks, with the curve bear steepening.
• Bloomberg reports that the BoJ is purchasing government bonds at a record pace this year, a factor that likely prompted its recent move to allow larger yield movements to reduce the strain on its control of longer-term interest rates. (See link)
• Cash JGBs are cheaper, with yields 0.1-1.1bp higher. The benchmark 10-year yield is 0.8bp higher at 0.643%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• The swaps curve has bear steepened, with rates 0.2-2.0bp higher. Swap spreads are wider.
• Tomorrow the local calendar is empty, apart from Liquidity Enhancement Auction for OTR 5-15.5-Year JGBs.