Futures Off Lows At Lunch But Still Sharply Cheaper

At the Tokyo lunch break, JGB futures are holding sharply cheaper, -37 compared to settlement levels, but above the session low of 145.75 (-56). With the domestic calendar empty, apart from 10-year climate transition bond supply, local participants have been content to maintain the negative lead-in from US tsys overnight.

• (Bloomberg) -- The world’s first sovereign transition bonds on sale Wednesday in Japan look set to see strong demand due to their novelty despite scepticism among investors abroad about the debt’s environmental credentials. (See link ICYMI)
• (Bloomberg) -- Governor Kazuo Ueda is in a rare sweet spot for Japanese monetary officials as he weighs a historic policy move with virtually no political opposition, in sharp contrast to the experiences of his Bank of Japan predecessors. (See link)
• The cash JGB curve has bear-steepened, with yields 1-4bps higher. The benchmark 10-year yield is 1.7bps higher at 0.745% versus the morning high of 0.772%.
• The BoJ expanded its balance sheet by 0.5% to a record 760 trillion yen in the past 10 days.
• Swaps are mostly cheaper, with rates 1bp lower (20-30-year) to 3bps higher (40-year). Swap spreads are tighter.