Holding Cheaper At Lunch, Belly Outperforms In 2-5-10 Fly

JGB futures sit cheaper but off Tokyo session lows at the lunch break. Early in the local session JGB futures extended weakness seen in post-Tokyo trade ahead of the weekend, making a low of 147.52, before recovering to 147.64, -7 compared to settlement levels.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined speculation that the BoJ may begin the assessment of its ultra-loose policy settings later this week.
• Cash JGBs are 0.7bp cheaper to 0.9bp richer with belly outperforming in a 2-5-10 fly. The benchmark 10-year yield is 0.2bp higher at 0.474%, below the BoJ's YCC limit of 0.50%.
• Swaps curve twist steepens pivoting in the 7-year zone with swap spreads marginally wider across the curve, except for the 2-year zone.
• In his appearance in Parliament, BoJ Governor Ueda stated that the BoJ’s inflation forecast for half-year, 1 year and 1.5 years ahead must be quite strong and close to 2% when asked about the conditions for the BoJ to consider tweaking YCC.
• Although his ruling party won four out of five by-elections held on Sunday, PM Kishida pushed back against the notion of an early election, according to Kyodo News.