Futures Holding Overnight Gains Ahead of 2-Year Supply

JGB futures hold the overnight richening in the Tokyo morning to be +24 versus settlement levels. At 147.97, they remain below the post-Tokyo trade high of 148.16.

• Without economic data or meaningful news flow, local participants appear to be digesting overnight strength in US Tsys. That said, US Tsys have opened weaker on the back of firmer equity futures following better-than-expected earnings in the tech space from Microsoft and Alphabet.
• Cash JGBs are 0.3 to 2.0bp richer across the curve with the 1-year zone the weakest and the 7-year zone the strongest. The benchmark 10-year yield is 1.1bp richer at 0.467%, below the BoJ's YCC limit of 0.50%.
• The benchmark 2-year yield is 0.4bp lower at -0.04bp, ahead of this afternoon’s 2-year JGB supply, showing little concession as the curve reacts to overnight moves with the 7-year outperforming on the bid in futures.
• Swaps curve bull flattens with swap spreads generally tighter, apart from the 7-year and 20-year.
• In his appearance in Parliament, Governor Ueda has so far covered familiar ground when questioned stating that monetary easing isn’t helping government financing.