Futures Pressure Overnight As Banking Worry Recedes, 40-Year Supply Eyed

Reduced (albeit nowhere near completely removed) worry surrounding global banks applied pressure to core global FI markets on Monday, leaving JGB futures -42 at the end of overnight trade, finishing just above worst levels.

• Technically, the Mar 20 high (149.53) is the first resistance in JGB futures. Nonetheless, rallies remain sold ahead of this level and any resumption of weakness would expose next support at the Jan 13 low (144.15).
• Japanese investing giant Dai-Ichi Life has flagged a shift in capital allocation to JGBs from U.S. Tsys and other foreign securities, given the well-documented, elevated currency hedging costs imposed on the Japanese investor base at present. ALM duration matching activity sees Dai-Ichi preferring 30- & 40-Year JGBs, per the BBG interview. The firm also flagged a want to deploy capital in alternative assets as it looks to boost returns (flagging private equity, real assets and hedge funds as potential destinations for capital).
• When it comes to wider JPY-denominated issuance, Slovenia has flagged that it plans to issue JPY paper by year end, which will likely take the form of a sustainability bond.
• 40-Year JGB supply headlines the domestic docket today. Elsewhere, outgoing BoJ Governor will make an appearance.