Futures Holding Gains Sparked By Trust Fund Buying At Lunch

At the Tokyo lunch break, JGB futures are standing at 148.57, +14 compared to the settlement levels, after reaching a session high of 148.69.

• JBU3 closed overnight trading in negative territory but strengthened in the Tokyo morning after the latest data from Japan Securities Dealers revealed trust banks had bought a record amount of super-long JGBs last month as speculation of a possible tweak to the BoJ’s yield-curve control policy receded.
• There hasn’t been much in the way of domestic drivers to flag, outside of the JSDA announcement.
• The local data calendar has the final April Industrial Production readings, along with April Capacity Utilisation out later today. The final May Machine Tool Orders print is also due.
• The cash JGB curve bull flattens with yield movement ranging from 0.1bp lower (2-year zone) to 2.1bp lower (30-year zone). The benchmark 10-year yield is 1.3bp lower at 0.387%, below the BoJ's YCC limit of 0.50%.
• The 5-year benchmark is underperforming on the curve ahead of supply later in the week with the yield 0.3bp lower at 0.077%.
• The swap curve has also bull flattened with swap spreads tighter across the curve.