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Futures Off Lows, 30-Year Auction Aids Twist Steepening


JGB futures recouped the losses incurred during the early break through their overnight session base, with the initial move lower presumably triggered by the firmer than expected wage data flagged earlier and Tokyo reaction to Monday’s weakening in core global FI markets. Futures are -10 into the close, while cash JGBs are 1bp richer to 1bp cheaper, pivoting around 30s.

  • BoJ matters continue to dominate with Finance Minister Suzuki being the latest Cabinet level official to explicitly push back against the idea that BoJ Deputy Governor Amamiya has been tapped to succeed outgoing Governor Kuroda. Meanwhile, Chief Cabinet Secretary Matsuno noted that the timing and method of BoJ appointments are a matter for the Diet.
  • Elsewhere, we saw comments surrounding last year’s intervention in FX markets on the part of the Japanese government, but there was little new information provided alongside the data, with Finance Minister Suzuki reiterating well-trodden rhetoric surrounding the FX market.
  • The low price at the latest round of 30-Year JGB supply just missed expectations, while the price tail widened a touch even as the cover ratio pushed above the 6-auction average. It would seem that the relative richness vs. other super-long benchmarks and continued uncertainty re: BoJ policy post-Kuroda was enough to disincentivise some prospective bidders, albeit with prevailing yield levels proving enough to generate a baseline level of demand. 30+-Year paper struggled post auction, resulting in the aforementioned twist steepening.
  • BoJ Rinban operations covering 1 to 25-Year JGBs headline domestically on Wednesday.
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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