Futures Little Changed At Lunch, BoJ Rinban Operations Mixed

At the Tokyo lunch break, JGB futures are little changed, +1 versus settlement levels, as investors await the results of BoJ Rinban operations covering 1- to 25-Year JGBs.

• In the absence of domestic catalysts, market participants are currently analysing the impact of recent US data and the ongoing impasse in US debt ceiling discussions. US tsys have witnessed a bull steepening in Asia-Pac trade, with the 2-year yield decreasing by 7bp while the 10-year yield by 1bp.
• Cash JGBs are little changed at the Tokyo lunch break with yield changes ranging from +0.8bp (1-year) to -0.9bp (5-year). The benchmark 10-year yield is 0.2bp lower at 0.402%, below the BoJ's YCC limit of 0.50%.
• During this morning's BoJ Rinban operations for 1-10-year JGBs, spreads remained flat to negative, while cover ratios (1-3-year: 1.79x, 3-5-year: 2.52x, and 5-10-year: 2.47x) remained largely unchanged. This outcome could potentially provide mild support for JGBs in those maturity ranges during the early stages of the Tokyo afternoon session. In the 10-25-year operation, a positive spread was observed, along with a slightly higher cover ratio of 2.18x compared to the previous figure of 2.06x. This could potentially exert some slight pressure on the market.
• Swap curve bull flattens out to the 10-year zone with rates 0.1 to 0.8bp lower. Rates for the 20-year zone and beyond are flat to 0.5bp lower. Swap spreads tighter across the curve.