Futures Holding In Positive Territory Ahead Of 2Y Supply

At the Tokyo lunch break, JGB futures are holding in positive but below the overnight closing level, +11 compared to settlement levels, ahead of 2-year supply.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined somewhat mixed December jobs data.
• Cash JGBs are dealing slightly mixed, with yield movement bounded by +/- 0.5bp. The benchmark 10-year yield is flat at 0.723% versus the Nov-Dec rally low of 0.555%.
• The 2-year is unchanged ahead of today’s supply. It is noteworthy that today's supply follows a 5-year offering earlier this month that showed lacklustre demand, which appeared to indicate that the yields in mid-January did adequately account for uncertainties surrounding the BoJ policy outcome. The poor digestion of January’s 5-year supply was reflected in the auction's low price which failed to meet dealer expectations and the cover ratio that declined relative to December’s auction.
• Swaps are slightly cheaper, with swap spreads slightly wider.