Holding Firm, Long End Lags Into Supply

JGB futures held firm during the Tokyo morning, hitting the break 8 ticks above settlement levels, with bulls failing to force their way through the 152.00 level. Cash JGBs were up to 1.5bp richer across the curve at the bell, although super-long paper underperformed ahead of today's 40-Year supply.

• The minutes from the BoJ's December meeting noted that "as for such purchases as of ETFs, a few members were of the opinion that this measure had played a significant role thus far as part of QQE with Yield Curve Control and remained necessary. One of these members expressed the view that it was premature to consider a so-called exit from those purchases. A few members said that active purchases, such as of ETFs, should be maintained for the time being, and that, under prolonged monetary easing, the Bank should seek room to make flexible adjustments depending on market conditions while taking into consideration the effects on market functioning as well as the Bank's financial soundness.
• Re: YCC, the minutes noted a "few members commented that it was necessary for the Bank to enhance its sustainability through the flexible conduct and be prepared, so that it could respond effectively to possible changes in economic activity and prices as well as financial conditions. A different member expressed the view that it was necessary to take into account the possibility that, along with the increase in issuance of JGBs, supply-demand conditions would be eased in the bond market; meanwhile, with a view to simultaneously achieving prolonged monetary easing and financial system stability, it was desirable, in a sense, for the yield curve to become steeper at a moderate pace. This member continued that, in this situation, it would become necessary to control the yield curve more carefully and finely."