Futures Little Changed At Lunch, US Tsys Give Some Of Yesterday’s Gains, 10Y Supply Due

At the Tokyo lunch break, JGB futures are holding a downtick, -3 compared to settlement levels, after dealing in a relatively narrow range. Local participants are likely digesting the FOMC decision and Fed Chair Powell’s press conference. There has been a paring of yesterday’s rally in US tsys in today’s Asia-Pac session. Cash US tsys are dealing 3-5bps cheaper, with a slight flattening bias.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined International Investment Flows and PMI Manufacturing data.
• Cash JGBs are 1-2bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 1.4bps higher at 0.746% ahead of today’s supply.
• The current 10-year auction is taking place with an outright yield that is approximately 15bps higher than the early January offering. Nevertheless, the current yield is still more than 20bps below the cycle peak, set in early November. Relative to the January auction, the 2/10 yield curve is around 10bps steeper.
• It's also notable that the relative affordability of 10-year JGBs compared to futures, as indicated by the spread between the 7- and 10-year JGBs, is currently at its highest point since 2015.
• The swaps curve has bear-steepened, with rates flat to 3bps higher. Swap spreads are wider.