Futures Holding Sharply Higher At the Lunch Break, 20Y Supply Results Due

At the Tokyo lunch break, JGB futures are holding richer, +51 compared to settlement levels, but sitting below the Tokyo session high.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined weekly international investment flows and core machine orders. The final read of IP for October is due later today.
• Cash US tsys are 2-8bps richer, with the curve steeper, in today’s Asia-Pac session. The yield on 10-year has fallen below 4% for the first time since August.
• The cash JGB curve has bull-flattened, with yields 0.7bps to 5.5bps lower. The benchmark 10-year yield is 5.1bps lower at 0.643%.
• The 20-year is 5.3bps lower at 1.382%, showing no concession on the curve, ahead of today’s supply. Today's issuance of 20-year JGBs follows a successful November auction, but notably poor demand metrics for 10- and 30-year supply in December.
• Supporting the bid tone today is the growing optimism surrounding the BOJ’s policy outcome. A Bloomberg report on December 11 indicated that BOJ officials see little urgency in scrapping the world’s last negative interest rate this month, as they await sufficient evidence of wage growth to support sustainable inflation.
• Swaps curve has also bull-flattened, with swap spreads generally narrower.