Futures Recover, Curve Twist Steepens

JGB futures have recovered from their early downtick to print +7 ahead of the close, more than paring their overnight losses in the process.

• The early downtick may have been facilitated by press reports flagging an uptick in FY23 debt servicing costs (~11% higher than initial estimates for FY22) and hope surrounding the relaxation of COVID testing for vaccinated international visitors journeying to Japan.
• The broader space moved away from session cheaps as equities struggled in the wake of Monday’s Wall St. weakness, with the JGB curve twist steepening as yields run 0.5bp richer to 2.0bp cheaper, pivoting around the 10- to 20-Year zone.
• It seems that the domestic life insurer & pension fund investor cohort is on hiatus this week after signs of demand from that cohort became apparent in the super-long end last week.
• Looking ahead, BoJ Rinban operations covering 1- to 10-Year JGBs headlines the local docket on Wednesday.