Futures Richer & At Tokyo Session Highs After 10Y Supply

JGB futures are sharply higher, +30 compared to settlement levels, after dealing in a relatively narrow range in the Tokyo morning session. The catalyst for the move higher was a solid 10-year JGB auction. The low price matched wider expectations, the tail shortened, and the cover ratio improved to 3.648x from 2.904x at January’s auction. It is worth noting that the cover ratio has improved for two straight months after December’s cover was the lowest seen at a 10-year auction since 2021.

• Afternoon strength in JGB futures came despite a paring of yesterday’s post-FOMC gains in US tsys in today’s Asia-Pac session. US tsys are currently dealing 1-5bps cheaper across benchmarks. Market commentators have started to push back their forecast for Fed cuts.
• International Investment Flows and PMI Manufacturing data failed to be market-moving.
• Post-auction dealings have shown a change of fortune for cash JGBs. After cheapening in the morning session, JGBs are now 1-3bps richer across benchmarks, with the 10-year leading. The benchmark 10-year yield is 2.5bps lower at 0.707% versus the morning high of 0.747%.
• The swaps curve is dealing slightly richer beyond the 2-year. Swap spreads are wider.
• Tomorrow, the local calendar sees Monetary Base data, along with BoJ Rinban Operations covering 1-10-year JGBs.