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Futures Pressured By A Very Poor 20Y Auction, National CPI Tomorrow


JGB futures pushed to a new Tokyo session low of 146.26 in afternoon trade. The catalyst for the move was very poor digestion of today's 20-year supply.

  • The highest outright yield since February and the steepest 10/20 curve since March were unable to facilitate a successful takedown of this month's 20-year supply. The low price fell well below dealer expectations (95.55 versus 96.75 est.), the cover ratio tumbled to 2.795x from 3.382x last month and the tail lengthened to its longest since 1987.
  • Currently, JBU3 is 146.39, -24 compared to settlement levels.
  • The cash JGB curve has bear steepened in the afternoon session, with yields 0.1bp to 4.8bp higher. The benchmark 10-year yield is 1.4bp higher at 0.645%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
  • The 20-year JGB yield is currently 4.8bp higher on the day at 1.357%, after hitting a session high of 1.381% in the aftermath of the 20-year auction result.
  • The swaps curve has bear steepened, with rates 0.8bp to 5.0bp higher. Swap spreads are generally wider across the curve.
  • Tomorrow the local calendar sees National CPI.

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