Futures Richer, At Session Highs, Despite A Relatively Poor 10Y Auction

JGB futures are sitting at session highs, +23 compared to settlement levels, after initially cheapening in early afternoon trade on the back of a relatively poor showing for 10-year supply. The low price failed to meet wider expectations, the cover ratio declined to the lowest level observed at a 10-year auction since May and the tail increased to its longest also since May.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined unemployment rate that undershot expectations.
• Cash JGBs are mixed across the curve with yields +1.8bp (30-year) to -2.4bp (7-year). The benchmark 10-year yield is 1.4bp lower at 0.598%, above the BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• ICYMI, after yesterday’s unscheduled Y300bn purchase of 5- to 10-year JGBs at market, the BoJ only announced today the intention to buy an unlimited amount of 5- to 10-Year JGBs at a fixed rate of 1.0%.
• Swap rates are trading mixed with swap spreads wider.
• Tomorrow the local calendar sees the release of BoJ Minutes for the June meeting and Monetary Base data for July along with BoJ Rinban operations covering 1- to 25-Year+ JGBs.