Futures Hit Tokyo Session Cheaps In Afternoon Trade

JGB futures have weakened in afternoon Tokyo trade, reaching session lows and currently standing at -15 compared to the settlement levels.

• There haven't been significant domestic factors worth highlighting, apart from the previously mentioned positive results of the May Preliminary Jibun Bank Services and Manufacturing PMI. Consequently, local market participants are likely monitoring headlines and observing the movements in US tsys. In Asia-Pacific trade, US tsys have shown a twist flattening, with yields +1bp to -1bp.
• Cash JGBs are mixed across the curve with yields +1.3bp to -0.6bp. The 40-year zone is the strongest performer ahead of the scheduled supply on Thursday. The benchmark 10-year yield is 0.3bp lower at 0.396%. The futures-linked 7-year zone is the weakest with its yield +1.2bp.
• The auction of 10-year inflation-indexed JGBs draws a higher-than-expected cut-off price, indicating strong demand as the Asian nation’s inflation remains elevated. The bid-to-cover ratio rose to 3.5 from 3.06 on Feb. 9, which was the lowest since August 2021.
• Swap rates are higher with the curve steeper. Swap spreads are wider across the curve, beyond the 1-year zone.
• Tomorrow will see BoJ Rinban operations covering 1- to 25-Year JGBs along with Machine Tool Orders (April final).