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Futures Holding Slightly Weaker, No Data, 40-Year Supply Due


JGB futures are holding slightly weaker, -5 compared to settlement levels, after trading in a relatively narrow range so far in the Tokyo morning session.

  • The local calendar is empty today ahead of June PPI data tomorrow.
  • Bloomberg reports that despite Ueda’s insistence of keeping stimulus in place, price growth in Japan continues to track well above 3%, leaving the BOJ little choice but to raise its inflation forecast for this fiscal year at this week’s meeting. That likely upward revision has helped keep speculation simmering of an adjustment or scrapping of yield curve control. (See link)
  • Cash JGBs are dealing mixed with yield changes bounded by -0.9bp (40-year) and +0.5bp (futures-linked 7-year). The benchmark 10-year yield is 0.2bp higher at 0.465%, below BoJ's YCC limit of 0.50%.
  • The 40-year zone is outperforming, showing no concession on the curve, with its yield at 1.477% ahead of today’s supply. The current 40-year auction takes place with the outright yield at a similar level to the previous outing in late May despite a period of significant volatility since the last outing. The yield curve is also at a similar level to the late May auction.
  • The swaps curve twist steepens, pivoting at the 2-year, with rates 0.1bp lower to 2.2bp higher. Swap spreads are wider across the curve.

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