Futures Weaker At Lunch, 20Y Supply Due

At the Tokyo lunch break, JGB futures are weaker and near session lows, -12 compared to settlement levels. With the domestic calendar light, local participants have likely focused in the resumption of trading for cash US tsys after yesterday’s holiday. Cash US tsys are dealing 1-2bps cheaper in today’s Asia-Pac session.

• The JGB market is also likely to have been impacted by a Reuters report that cited sources familiar with the bank’s thinking, which believed the BoJ is on track to end negative interest rates in coming months despite the country’s economy falling into recession. Weak domestic demand means the BoJ may seek more clues on wage growth before acting.
• Cash JGBs are modestly cheaper across benchmarks out to the 30-year. The benchmark 10-year yield is 0.6bp higher at 0.741% versus the Nov-Dec rally low of 0.555%.
• The 20-year is 0.7bp higher at 1.523%, underperforming on the curve ahead of today’s 20-year supply. The current auction presents an outright yield that is around 15bps higher than the level observed in January but approximately 25bps lower than the cycle high set in late October.
• Today's auction also follows on the heels of solid results at February’s 10- and 30-year JGB supply.
• The swaps curve has slightly bear-steepened, with rates flat to 1bp higher. Swap spreads are mostly wider.