JGBS: Bull-Flattener After BoJ Takata & 30Y Supply

JGB futures are richer but well off the session high, +10 compared to settlement levels

• Outside of the previously outlined stronger-than-expected cash earnings data, the market has had a speech by BoJ board member Takata and 30-year supply to digest.
• (MNI) BoJ Takata said that the BoJ will raise the policy interest rate further if prices move in line with forecasts and solid capital investment and pass-through of cost increases are confirmed.
• However, Takata downplayed an imminent rate hike, saying the BoJ must monitor evolving market and economic conditions. “Developments of overseas economies following the rate hikes are the risk factor and the BoJ needs to monitor evolving conditions with high vigilance,” Takata told business leaders in Kanazawa City.
• Cash US tsys are ~1bp cheaper across benchmarks in today’s Asia-Pac session after yesterday’s solid post-data rally.
• The cash JGB curve has bull-flattened, with yields flat to 3bps lower after today’s 30-year supply. The 30-year supply was adequately absorbed, with the low price aligning with dealer expectations. The cover ratio remained steady, and the auction tail lengthened only slightly.
• Swap rates are little changed across the curve.
• Tomorrow, the local calendar will see Household Spending and Coincident & Leading Indices data alongside BoJ Rinban Operations covering 5-25-year+ JGBs.