Futures Downtick A Middle East-Induced Haven Buying Quickly Fades

JGB futures are dealing with a downtick in the Tokyo afternoon session, -6 compared to settlement levels, after quickly reversing early strength sparked by the weekend’s Middle East developments. Nevertheless, spillover from higher oil prices will likely remain in focus today, after the attack on a Russian Oil tanker in the Red Sea late Friday and the weekend attack on US soldiers in Jordan near the border with Syria.

• Cash US tsys are dealing ~1bp richer in today’s Asia-Pac session.
• Today, the local calendar has been empty, apart from BoJ Rinban Operations covering 3-10-year and 25-year+ JGBs. The results were mixed, with lower offer cover ratios across the buckets but positive spreads. The impact on the market has been minimal.
• Cash JGBs remain cheaper on the day, but slightly richer than lunchtime levels. The 20-year is underperforming, with its yield 2.3bps higher at 1.547%. The benchmark 10-year yield is 0.9bp higher at 0.726% versus the Nov-Dec rally low of 0.555%. The 2-year is outperforming (+0.4bp) ahead of tomorrow’s supply.
• Swaps curve is witnessing a bear-steepening, with rates flat to 3bps higher. Swap spreads are mostly wider, apart from the 20-year.
• Tomorrow, the local calendar sees Jobless Rate and Job-To-Applicant Ratio data.