Futures Sit Just Above Session Lows, BoJ Gov Ueda & PM Kishida Discuss Financial Conditions

In the Tokyo afternoon session, JGB futures are dealing just above session lows, -11 compared to settlement levels.

• A thin local docket has left market participants on headlines and US tsys watch.
• US tsys sit little changed across the major benchmarks in Asia-Pac trading. The pivotal economic event of this week centres on the speech by Fed Chair Powell at the Jackson Hole gathering on Friday.
• Prime Minister Fumio Kishida and Bank of Japan Governor Kazuo Ueda met Tuesday to discuss financial conditions amid continued weakness in the yen and a rise in bond yields to the highest in nine years. (See link)
• The cash JGB curve bear steepens, with yields flat to 4.4bp higher (20-year).
• The 10-year JGB yield reached 0.665% on Tuesday, the highest since 2014, raising the prospect that the BoJ may come into the market with an unscheduled bond-buying operation to slow gains. (See link)
• The MoF’s Liquidity Enhancement Auction for OTR 5-15.5-Year JGBs sees weaker demand, with the cover ratio declining to 3.604x from 4.237x.
• The swaps curve has also bear steepened, with rates 0.1bp to 1.3bp higher. Swap spreads are narrower.
• Tomorrow the local calendar sees Jibun Bank PMI data for August (Preliminary), along with BoJ Rinban operations covering 1-5-year and 10-25-year JGBs.