Futures Extend Overnight Weakness, JGB Curve Bear Steepens

JGB futures are cheaper in early Tokyo trade, -15 compared to settlement levels, extending weakness seen in overnight trade. Without domestic drivers, local participants are likely on headlines and US tsys watch.

• Cash tsys are dealing ~1bp richer across the major benchmarks with Asia-Pac participants fading yesterday’s post data cheapening, perhaps using the opportunity to exit short positions/enter fresh longs ahead of month end.
• The cash JGBs curve bear steepens led by the 10-year zone. The benchmark 10-year yield is 1.6bp higher at 0.390%, below the BoJ's YCC limit of 0.50%.
• The benchmark 20-year yield is 1.2bp higher at 0.97% after yesterday’s sale of 20-year JGBs drew a lower-than-expected cut-off price, a wider tail and a lower cover ratio. Yield on 20-year debt advanced 1.5bp to 0.958%.
• According to Bloomberg, Shoki Omori, chief desk strategist at Mizuho Securities, expressed the view that 20-year JGBs appeared to be "a bit rich." Omori added that only those with short positions to cover participated in the auction.
• Swap rates are higher across the curve with the 40-year leading (+1.0bp). Swap spreads are wider out to the 5-year and narrower beyond.