Futures Richer & At Session Highs Ahead Of 20Y Supply

At the Tokyo lunch break, JGB futures are sharply higher, +32 compared to settlement levels, after closing the overnight session with a small gain.

• With the domestic data calendar empty today, local participants appear to have focused on an extension of yesterday’s longer-dated US tsy rally in today’s Asia-Pac session. Cash US tsys are flat to 2bps richer, with the curve flatter.
• The cash JGB curve bull-flattens, with yields flat to 3.4bps lower. The benchmark 10-year yield is 2.6bps lower at 0.724% versus the cycle high of 0.97% set in late October and the BOJ's 1% YCC reference rate.
• The 20-year yield is 3.4bps lower at 1.443%, outperforming on the curve, ahead of today’s supply. Today's issuance of 20-year JGBs follows a challenging reception in October but solid demand metrics for November’s 30-year supply.
• The current 20-year auction features an outright yield approximately 10bps lower than the level seen in mid-October and around 30bps lower than the cycle high set late in October. While one might anticipate reduced demand in isolation, it's crucial to consider the improved sentiment towards longer-dated bonds globally in November, especially following positive inflation data.
• The swaps curve has also bull-flattened, with swap spreads generally tighter.