Futures Unchanged, Middle Of The Tokyo Range

JGB futures are unchanged, flat compared to the settlement levels, dealing in the middle of the Tokyo session range. The morning session saw the sell-off sparked by the much stronger-than-expected Q2 GDP print unwound. However, lacklustre demand seen at the 5-year auction saw futures weaken again in the Tokyo afternoon session.

• The 5-year auction faced a lacklustre reception with pricing falling short of dealer expectations. The lack of demand was also reflected in the cover ratio falling to the lowest level observed at a 5-year auction since March. Adding to these concerns, the tail also grew longer, marking its most extended length since March.
• Cash JGBs are cheaper across the curve beyond the 1-year, with yield movements ranging from flat (3-4-year zone) to +1.3bp (10-year). The 10-year yield is at 0.625%, above BoJ's YCC old limit of 0.50% but below its new hard limit of 1.0%.
• The swap curve bear steepened, with rates 0.2bp higher to 1.6bp higher. Swap spreads are wider, apart from the 7-10-year.
• Tomorrow the local calendar is light with Department Store Sales as the highlight.
• Tomorrow also sees BoJ Rinban operations covering 1-3-year, 5-10-year and 25-Year+ JGBs.