Futures Weaker, BOJ Tweak Fears Weigh, Curve Bear Steepens

JGB futures are holding cheaper, -18 compared to the settlement levels, after gapping lower at the open following a Sunday article in the Nikkei newspaper that reported BOJ officials are pondering whether to tweak the settings of the yield-curve control program at the upcoming policy meeting. The article didn’t say where it obtained the information.

• The local calendar was empty today, apart from BOJ Rinban operations covering 1- to 25-year JGBs. These operations saw positive spreads and generally higher cover ratios, which, as expected, has generated some pressure in the Tokyo afternoon session.
• The cash JGB curve has bear-steepened, with yields 0.1bp to 6.1bps higher. The benchmark 10-year yield is 1.2bps higher at 0.854%, above BOJ's YCC soft limit of 0.50% but below its hard limit of 1.0%. It is also slightly lower than the fresh cycle high of 0.866% set today.
• The swaps curve has also bear-steepened, with rates 0.6bp to 3.5bps higher. Swap spreads are mixed across maturities.
• Tomorrow the local calendar sees Jibun Bank Japan PMI and Department Store Sales data.
• The US docket is thin today, with just the Chicago Fed National Activity Index due.