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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
JGBS
JGB futures eased off session highs (148.11) into the lunch break and finished the morning session at 147.88, 62 ticks below previous settlement, despite an upsized bond purchase operation by the BoJ. Cash curve runs steeper, as pressure piles on the super-long end despite 10s trading virtually flat on the day.
- The Bank yesterday announced that it would but Y500bn of 5- to 10-Year JGBs in an unscheduled operation today. The size of the operation was unexpectedly raised to Y800bn as 10-Year yield remained above the 0.25% ceiling established under the BoJ's YCC framework.
- Bond-purchase operations have helped to anchor 10-Year yield, which still sits marginally above 0.25% but defies broader cheapening pressure which has shifted the rest of the yield curve higher.
- However, the steepening impetus is putting pressure on the BoJ to extend bond buying further out the curve, with the 10-/30-Year yield gap widening sharply to multi-year highs. Purchases of longer-dated debt would not be unprecedented and last occurred in March.
- Note that the MoF will conduct a liquidity enhancement auction covering off-the-run JGBs with maturities of 15.5-39 Years, which will place renewed focus on the longer end of the curve.
Fig. 1: Japan 10-/30-Year Yield Spread (bp)
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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