Futures Stronger After A Smooth Absorption Of 10Y Supply

JGB futures are holding an uptick, +2 compared to settlement levels, after 10-year supply was smoothly absorbed, with the low price matching wider expectations and the tail shortening. The cover ratio however declined to 3.239x from 3.648x at February’s auction. It is worth noting that today’s cover ratio remains higher than December’s, which was the lowest seen at a 10-year auction since 2021.

• With an outright yield similar to the February outing, growing expectations that the BoJ could remove NIRP as early as this month (18-19 March) possibly weighed on the bid at today’s auction.
• It was also notable that the relative affordability of 10-year JGBs compared to futures, as indicated by the spread between the 7- and 10-year JGBs, was around its highest point since 2015.
• There hasn’t been much in the way of domestic data drivers to flag, outside of the previously outlined Tokyo CPI.
• Cash JGBs are dealing mixed, with yields 1.2bps lower (20-year) to 1.3bps higher (30-year). The benchmark 10-year yield is 1.0bp lower at 0.709% versus the Nov-Dec rally low of 0.555%.
• Swaps are richer, with the belly of the curve slightly outperforming (rates 1bp lower). Swap spreads are tighter apart from the 10-20-year zone.
• Tomorrow, the local calendar is empty.