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Futures Higher But Off Bests, Rinban Operations for 3- to 25-Year+ JGBs Tomorrow

JGBS

In afternoon trade, JGB futures are dealing richer, +17 compared to settlement levels, but off session bests.

  • There hasn’t been much in the way of domestic data drivers to flag, outside of the previously outlined jobless rate that surprised on the upside.
  • That said, 2-year supply witnessed lacklustre demand, with the low price failing to meet dealer expectations and the cover ratio declining to the lowest observed at a 2-year auction since 2010. It is noteworthy that today’s 2-year JGB auction today was the first 2-year supply since the BoJ's decision to tweak yield curve control (YCC). August’s 5-year supply also saw weak demand.
  • The cash JGB curve has twist flattened, pivoting at the 4s, with yields 0.4bp higher to 1.5bp lower. The benchmark 10-year yield is 1.2bp lower at 0.652%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%. The 2-year is 0.1bp higher on the day at 0.01%, after being at 0.003% before the auction result.
  • The swaps curve has bull flattened, with rates 0.1bp to 1.0bp lower. Swap spreads are narrower, apart from the 7-20-year zone.
  • Tomorrow the local calendar sees Consumer Confidence data for August, along with BoJ Rinban operations covering 3- to 25-Year+ JGBs.
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