Futures Holding Stronger At Lunch, Cash Curve Twist Steepens

At the Tokyo lunch break, JGB futures are holding richer, +9 compared to the settlement levels.

• There hasn’t been much in the way of domestic drivers to flag.
• On the data front we have the tertiary activity index for May on tap later (market consensus is for a gain of 0.4%, versus 1.2% prior).
• Bloomberg reports that Keisuke Tsuruta, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities, writes in a note that upward pressure has been on the whole JGB yield curve on the back of rising speculation of policy tweak by the BoJ next week. Adding that under such an environment, distortion on the JGB yield curve is becoming more evident again. (See link)
• The cash JGB curve has twist steepened with yield movements ranging from 0.4bp lower (2-4-year zone) to 3.1bp higher (40-year). The benchmark 10-year yield is 0.2bp lower at 0.479%, just shy of its highest level in three months of 0.485% set on Friday.
• The swaps curve is mixed with rates within +/-0.6bp. The belly of the curve is outperforming. Swap spreads are wider outside from the 5-20-year zone.