Futures Sharply Higher Ahead Of 20Y Supply

In Tokyo morning trade, JGB futures are sharply higher, +25 compared to settlement levels, after closing the overnight session with a small gain.

• According to MNI’s technicals team, JGB futures held the bulk of the Friday rally through Monday trade, retaining strength above the post-CPI high last Tuesday. This keeps the market clear of the fresh pullback low printed at 143.57 last week. On the upside, clearance of 146.41, the Sep 4 high would instead highlight a base and a possible short-term reversal. Any continuation lower and the clear break confirms a resumption of the medium-term downtrend and paves the way for weakness towards 143.29, the 2.618 projection of the Mar 22 - Apr 18 - May 12 swing.
• 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 2.6bps 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 2.6bps lower at 1.443% ahead of today’s supply.
• The swaps curve has also bull-flattened, with swap spreads mixed.