Futures Hover Above Overnight Lows, Swap Rates Jump & Spreads Widen

JGB futures hover just above their overnight base in early Tokyo trade, but that line hasn’t been breached as of yet, with the contract last showing -25. Cash JGBs run little changed to 1.5bp cheaper, with 7s presenting the weakest point owing to the move in futures since yesterday’s settlement. Swap flows are providing a source of pressure outside of wider market moves lodged after the Tokyo close on Wednesday, with benchmarks rates on that curve sitting 1-7bp higher as swap spreads widen across all time horizons.

• As noted in the wake of the weekly international security flow data from the Japanese MoF, there hasn’t been any signs of meaningful repatriation of Japanese capital ahead of the turn of the Japanese FY (although Dai-Ichi Life recently outlined their intention to reshore capital, with a preference for deployment in the super-long end of the JGB curve). Meanwhile, last week saw international investors register the largest round of net weekly sales of Japanese bonds since the run up to the BoJ’s January meeting, although they got nowhere near reversing the prior week’s record net purchases.