Futures Sharply Higher As US Tsys Extend Rally, Familiar Tone to BOJ Adachi Speech

At the Tokyo lunch break, JGB futures are sharply higher, +60 compared to the settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of a speech from BOJ Board Member Adachi. The tone of the speech seemed similar to Governor Ueda’s recent remarks, namely the country's economy had yet to reach a stage where the central bank could debate an exit from ultra-easy monetary policy.
• Today's bid appears linked to an extension of yesterday's US tsy strength in today's Asia-Pac session. Generally dovish remarks by Fed Goolsbee aftermarket have added to bullish sentiment fueled by Fed Waller yesterday. Cash US tsys are 3-5bps richer across benchmarks.
• According to MNI’s technicals team, JGB futures are bullish, having risen to a new multi-month high last Tuesday. That high marked the highest since August on the continuation contract. This notably extends the recovery from the early November pullback low and keeps the S/T outlook tilted higher.
• The cash JGB curve has richened beyond the 1-year zone, with the belly outperforming. Yields are 0.4bp (2-year) to 7.5bps lower (10-year). The benchmark 10-year yield is at 0.703%. The 40-year continues to underperform on the curve, 0.1bp lower at 1.957%, after yesterday's poor auction result.
• The swaps curve has bull-flattened, with swap spreads mixed across maturities.