Futures Lead Move Lower In Tokyo

The well-documented Fed repricing witnessed since Tuesday’s Tokyo close has pressured the wider JGB space, with the major cash JGB benchmarks running 1-4bp cheaper early today.

• Futures have extended through their overnight base to trade -53 at typing, with the Sep 7 low (148.11) presenting the next point of meaningful technical support, providing protection from the mid-June lows that came about when the BoJ’s resolve re: its current YCC settings was being tested. Our technical analyst has flagged that the medium-term trend remains bullish and pullbacks at this stage are likely corrective in nature.
• The weakness in futures means that 7s underperform on the curve.
• Focus now moves to the potential upscaling of the BoJ’s 5- to 10-Year Rinban operations with 10-Year JGB yields moving towards the upper limit of the BoJ’s permitted trading band (0.25%). A reminder that last week saw the BoJ upsize its 5- to 10-Year BoJ Rinban operations to Y550bn from the Y500bn seen previously.