Futures Richer & At Session Highs, 5Y Supply Digestion Adequate

In afternoon dealings, JGB futures are sitting near Tokyo session highs, +9 compared to settlement levels.

• Today the local calendar has been light, with Machine Tool Orders due later today.
• Hence, local participants have likely been on headlines and US Tsys watch. Cash US Tsys are 3bps cheaper to 3bps richer in Asia-Pac dealings, with the curve flatter.
• Cash JGBs are mixed, with yield movements bounded by +0.2bp (1-year) to -2.5bps (30-year). The benchmark 10-year yield is 1.0bps lower at 0.773%. It is also lower than the cycle high of 0.814% set late last week.
• The 5-year JGB yield is 0.4bp lower at 0.311%, after today’s supply. Today's supply saw only adequate demand, with the low price meeting dealer expectations. The cover ratio of 4.056x was lower than the 4.415x recorded at the previous month's auction. However, it is worth noting that today's cover was the third highest for a 5-year auction in the past 12 months.
• The swaps curve has bull-flattened, with rates 0.4bp to 4.2bps lower. Swap spreads are tighter.
• Tomorrow the local calendar sees PPI, Core Machine Orders, Bank Lending Incl Trusts and Tokyo Avg Office Vacancies data. BOJ Board Member Noguchi is also due to give a speech in Niigata.