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Futures Gains Pared After Poor Digestion Of 30Y Supply

JGBS

In the Tokyo afternoon session, JGB futures are stronger, +18 compared to the settlement levels, but off the session’s best level. The paring of the morning’s gains can be attributed to the results from today’s 30-year JGB auction, which showed poor demand metrics. The low price failed to meet dealer expectations and the cover ratio ticked down versus last month’s auction. Moreover, the auction tail was significantly longer than the previous auction. Indeed, the tail was the longest since June 2019.

  • Possibly limiting the damage from the poor digestion of 30-year supply elsewhere on the JGB curve has been the fact that US tsys are flat to 3bps richer across benchmarks in the Asia-Pac session. The curve is steeper as local participants extend the post-ADP employment data bull-steepening seen in yesterday's NY session.
  • Cash JGBs are mixed, with yields 0.5bp lower (5-year) to 1.9bps higher (40-year). The benchmark 10-year yield is 0.4bp higher at 0.802%. It is slightly lower than the cycle high of 0.81%, set yesterday.
  • The swaps curve has twist-steepened, pivoting at the 3s, with rates 0.3bp lower to 3.9bps higher. Swap spreads are wider across maturities beyond the 3-year.
  • Tomorrow the local calendar sees Cash Earnings, Household Spending, and Leading and Coincident Indices.

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