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Futures Lower Despite Solid 2yr Auction Result, Curves Steeper In JGB & Swap Space

JGBS

JGB futures (JBM4) have been in a 147.70/80 range for the most part of today's session (last 145.70, -.18). We did see a brief move to 145.82 earlier. Some support may have been evident following a decent 2yr auction result, still there has been no follow through, with downward bias in recent dealings. We are still some distance from earlier lows in the week under 145.40.

  • The 2yr auction result went smoothly, with the bid to cover ratio above 4.0, indeed it was the highest result for the metric since end June last year (in terms of 2yr JGB sales).
  • In the cash JGB space we have seen higher yields towards the back end of the curve. The 20yr up around 4.5bps, 30-40yr up 3-4bps. The 2/10 curve is slightly steeper, last near +54bps. Current levels are close to the flattest levels we have seen since Dec last year. SO that may be lending some support to today's moves.
  • In the 10yr swap space, we have steady, last near 0.83%, but more broadly the steeper trend, like in the cash JGB space, has been evident.
  • Looking ahead, Monday delivers the Tankan survey for Q1.
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