Futures Flat At Lunch, Rinban Operations Suggest Slight Pressure In Afternoon Trade

At the Tokyo lunch break, JGB futures are just off Tokyo session bests, -2 compared to the settlement levels.

• Apart from the previously mentioned Jibun Bank Services and Composite PMI data, which failed to have an impact on the market as anticipated, there have been few notable domestic drivers to highlight.
• The cash US tsys curve bull steepens in Asia-Pac trade with yields are 0.9-4.0bp lower across the major benchmarks after being closed yesterday for the Independence Day holiday.
• Cash JGBs are richer across benchmarks with the benchmark 10-year yield 1.3bp lower at 0.371%, after yesterday’s 10-year auction showed solid demand with the low-price exceeding forecasts, the cover ratio reaching a four-month high of 4.024x, and the tail narrowing to its lowest level in four months.
• This morning’s BoJ Rinban operations saw generally higher and positive spreads (apart from the 10-25 operations which saw a decline and a negative average spread) and higher cover ratios (1-year, 4.16x, 1-3-year: 2.93x and 3-5-year: 2.21x and 10-25-year: 2.31x). This suggests some slight pressure on the JGB curve, particularly at the short-end, in early rounds of the Tokyo afternoon session.
• The swaps curve has twist flattened with swap spreads wider.