Futures Have Returned To Overnight Lows At Lunch, 20Y Auction Results Due

At the Tokyo lunch break, JGB futures are cheaper, -18 compared to settlement levels, and have revisited the overnight low ahead of today’s 20-year supply results.

• The local calendar is light today, with the Tertiary Industry Index out later as the sole release.
• Accordingly, local participants have likely monitored US tsys in the Asia-Pac session after the bear-steepening observed during the NY session. Cash US tsys are flat to 3bps cheaper, reversing early gains.
• Cash JGBs are cheaper today, with yields 0.6bp to 2.5bps higher. The benchmark 10-year yield is 0.3bp higher at 0.764%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814%.
• The 20-year JGB is dealing 1.8bp cheaper at 1.557%, underperforming on the curve, ahead of today’s supply. While one might expect that a yield similar to what was observed at last month’s auction should deliver a similarly positive result today, it's crucial to recognise that recent auctions of longer-dated securities suggest that local investors may be leaning towards seeking higher yields.
• The swaps curve has bear-steepened, with rates 0.4bp lower to 2.6bps higher. Swap spreads are mixed across maturities.