Futures Downtick, BoJ Gov. Ueda’s Comments Add Pressure, Mixed Results For 2Y Supply

JGB futures are holding a downtick, -2 compared to the settlement levels.

• There hasn’t been much in the way of domestic data drivers to flag, outside of the previously outlined Jibun Bank Flash PMIs.
• (MNI) BoJ Governor Ueda said the BoJ would tweak the degree of easy policy through adjustments to the unsecured overnight call loan rate if inflation rises to its 2% target as expected. (See linkICYMI)
• Cash US tsys are little changed in today’s Asia-Pacific session.
• Today’s 2-year supply demonstrated mixed demand metrics. The low price met dealer expectations and the auction tail was unchanged from last month. However, the cover ratio declined to 3.481x from 4.072x in March.
• This outcome is likely to be perceived as disappointing, especially considering the optimistic tone set by other JGB auctions in April.
• The cash JGB curve has maintained its bear-steepening, with yields flat to 4bps higher. The benchmark 10-year yield is little changed at 0.887%, just shy of the YTD high of 0.891%.
• The swaps curve has twist-steepened, pivoting at the 10s, with rates 1bp lower to 5bps higher. Swap spreads are tighter out to the 7-year and wider beyond.
• Tomorrow, the local calendar will see PPI Services data alongside BoJ Rinban Operations covering 3-25-year+ JGBs.