Futures Remain Cheaper But Have Pared Losses At The Tokyo Lunch Break

At the Tokyo lunch break, JGB futures are cheaper, -17 compared to settlement levels, but have pared overnight losses.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined offshore M2 & M3 money stock and international investor flows in the week ending October 6.
• ICYMI, Bloomberg reported that “Japan’s life insurers are expected to flag further selling of foreign bonds including Treasuries when they start outlining investment plans next week for the fiscal second half through March. Yet the extent of the sales may continue to moderate, in line with the trend seen in the fiscal first half, having made hefty reductions in overseas debt holdings last year.” (See link)
• The cash JGB curve sees a twist-steepening, pivoting at the 3s, with yields 0.5bp lower to 2.4bps higher. The benchmark 10-year yield is 0.7bps higher at 0.765%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also lower than the cycle high of 0.814% set late last week.
• The swaps curve has steepened, with rates 0.2bp to 2.6bps higher. Swap spreads are tighter out to 30-year.