Futures Stronger At Lunch, 30Y Supply Due

At the Tokyo lunch break, JGB futures are stronger, +29 compared to the settlement levels, after trading in a relatively narrow range in the morning session.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined international investment flow data.
• Accordingly, local participants have likely on headlines and US tsys watch after their spike reversal on Wednesday. Cash tsys are 2-3bps richer across benchmarks in Asia-Pac dealings as the local market digests the post-ADP employment data bull-steepening. TYZ3 is currently trading at an Asia-Pac session high of 107-09, +0-05+ from NY closing levels.
• Cash JGBs are mixed, with yields 0.8bp higher (1-year) to 1.3bps lower (30-year). The benchmark 10-year yield is 0.3bp higher at 0.801%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is slightly lower than the cycle high of 0.804%, set earlier today.
• The 30-year yield is at 1.808% ahead of today's supply. The outright yield and the 2/30 yield curve currently sit at their highest points since 2014. Market participants will be keen to see if this attracts investors to today's auction.
• The swaps curve has bull flattened out to the 30-year, with rates 0.4bp to 0.8bp lower. Swap spreads are tighter across maturities out to the 10-year and wider beyond.