Futures Have Up Ticked In Tokyo Morning Dealings, 5Y Supply Due

In Tokyo morning trade, JGB futures have turned the overnight downtick into an uptick, +4 compared to settlement levels.

• Today the local calendar is relatively light, with Machine Tool Orders as the only release later today.
• Cash JGBs are mixed, with yield movements bounded by +0.6bp (2-year) to -1.7bps (20-year). The benchmark 10-year yield is 0.8bp lower at 0.775%, 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% set late last week.
• The 5-year JGB yield is 0.3bp lower at 0.314%, ahead of today’s supply. It is worth noting that the 5-year has recoiled from the highest outright 5-year yield level this year over the past few days. Nevertheless, an outright yield still higher than that seen at the September auction should support the reception of today's auction. The September 5-year auction saw solid demand metrics, with the auction's low price beating dealer expectations, the cover ratio rising and the tail shortening.
• The swaps curve has bull-flattened, with rates 0.3bp to 3.0bps lower. Swap spreads are tighter, apart from the 7-year.