Futures Richer But Off Highs At Lunch, 30Y Supply Due

At the Tokyo lunch break, JGB futures are richer but off the session highs, +23 compared to settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined current account balance, bank lending and weekly international investment flow data.
• Benchmark US tsy yields are trading 1-2bps higher in today's Asia-Pac session. This movement could potentially be a reaction to the impact of oil prices following US missile strikes in response to Houthi attacks.
• Cash JGBs are richer out to the 20-year, with the futures-linked 7-year as the best performer (-1.9bps). The benchmark 10-year yield has declined by 1.3bps, settling at 0.590%.
• The 30-year JGB is dealing unchanged at 1.580% ahead of today’s supply. 30-year supply in December saw very poor digestion as the low price failed to meet dealer expectations and the cover ratio collapsed to 2.616x, the lowest level seen at a 30-year auction since 2015. The auction tail was also the longest on record.
• The current 30-year auction is taking place with an outright yield at a similar level to the early December offering. The 2/30 yield curve is slightly flatter and the 10/30 curve slightly steeper than the levels observed in early December.
• Swaps curve has maintained its bull-flattening, with rates 0.5bp to 2.0bps lower. Swap spreads are tighter across maturities.