Futures Holding An Uptick At Lunch, 20Y Supply Due

At the Tokyo lunch break, JGB futures are holding an uptick, +4 compared to the settlement levels, after dealing in a narrow range in the morning session.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined international investment flows and core machine orders data. The local calendar sees later Industrial Production and Capacity Utilisation data, along with 20-year supply.
• Bloomberg reports jitters about possible weak demand for Japan’s longer-maturity bonds are overhanging the market before a sale of 20-year securities amid speculation the BoJ may take steps to normalise policy. Yields on 20-year government securities touched their highest since January at 1.47% earlier this week. This jump in yields prompted the central bank to announce an operation today to offer five-year loans, which banks can use to buy bonds and keep yields in check. (See link)
• The cash JGB curve has twist-flattened, pivoting at the 10s, with yields 0.3bp higher to 2.4bp lower. The benchmark 10-year yield is 0.1bp lower at 0.712%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• The 20-year benchmark is 0.6bp lower at 1.443%, ahead of today’s supply.
• Swap rates are slightly mixed across the curve, with swap spreads wider.