Futures Off Overnight Lows, Long End Swaps Widen

JGB futures edged further away from the overnight lows at the Tokyo re-open, before sticking to a very narrow range through the morning session as participants assessed the overnight market news and looked ahead to 30-Year JGB supply.

• A solid 30-Year JGB auction provided some upward momentum in early afternoon trade, with the aforementioned relative and outright demand factors evident ahead of supply. In terms of auction details, the low price topped dealer expectations (98.80 per the BBG poll), with the cover ratio moving higher and tail narrowing vs. the previous auction.
• Still, that dynamic quickly unwound. Futures sit ~28 ticks below settlement levels, with 7s underperforming in cash trade as the space cheapened across the curve. Swap spreads were mixed, with the most notable moves coming in the long end, with 30- & 40-Year swaps widening.
• Japanese Finance Minister Aso confirmed that the MoF is drawing up a third budget, although he wouldn't elaborate on the size/contents of the fiscal package that will be deployed.