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Futures Holding Losses in Morning Trade, Curve Bear Steepens


In Tokyo morning trade, JGB futures are holding the overnight losses, -30 compared to settlement levels.

  • Offshore investor flows in the week ending October 6 showed foreign investors were once again sellers of local bonds (-¥643.6bn). Japan investors were modest purchasers of offshore bonds for the second straight week (¥183.4bn).
  • Bloomberg reports that “Japan’s life insurers are expected to flag further selling of foreign bonds including Treasuries when they start outlining investment plans next week for the fiscal second half through March. Yet the extent of the sales may continue to moderate, in line with the trend seen in the fiscal first half, having made hefty reductions in overseas debt holdings last year.” (See link)
  • The cash JGB curve sees a bear-steepening, with yields 0.2bp to 2.9bps higher. The benchmark 10-year yield is 1.1bps higher at 0.769%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814% set late last week.
  • The swaps curve has also steepened, with rates 0.7bp to 1.5bps higher. Swap spreads are wider out to the 4-year, narrower in the 5-30-year zone, and wider beyond.

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