Futures Weaker At Lunch, Testing A Key Technical Level

At the Tokyo lunch break, JGB futures are sitting just off the Tokyo session’s worst levels at 147.38, -36 compared to the settlement levels. This comes despite PPI and Core Machine Orders data undershooting expectations.

• According to the MNI technicals team, a breach of 147.34 would signal a deeper reversal and open 146.11, the Feb 22 low.
• According to Bloomberg, the slide in JGB futures, without a word from Japanese officials is fuelling more speculation about a policy tweak from the BoJ this month. It may appear premature when the BoJ hasn’t given anything away. But some traders are gearing up for a bigger JGB short which could run and run once policy tightening finally arrives. (See link)
• The cash JGB curve, beyond the 1-year zone, has bear steepened at the Tokyo lunch break with the futures linked 7-year zone underperforming (1.9bp cheaper). The benchmark 10-year yield is 0.7bp higher at 0.466%, below the BoJ's YCC limit of 0.50%.
• The 20-year benchmark is 0.9bp cheaper at 1.082%, ahead of tomorrow’s supply.
• Swap rates are higher as well across the curve. Swap spreads are wider out to the 7-year and tighter beyond.